UNIVERSITY OF GHANA 
 
CUSTOMER SATISFACTION AND LOYALTY: ASSESSING THE 
MODERATING ROLE OF SWITCHING COSTS IN THE 
INSURANCE INDUSTRY 
 
BY 
 
AGYA KWADJO SEKYERE 
(10442283) 
 
 
 
THIS THESIS IS SUBMITTED TO THE UNIVERSITY OF GHANA, 
LEGON IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR 
THE AWARD OF MPHIL MARKETING DEGREE 
 
 
 
 
 
 
 
JULY, 2015
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DECLARATION 
I do hereby declare that this thesis is the result of my own effort and all references cited 
have been duly acknowledged for the award of an MPhil degree in Marketing. To the best 
of my knowledge, this study has no material previously published by another person or has 
been accepted for the award of any other degree in this or any other University. I do bear 
sole responsibility for any limitations to this study. 
 
 
 
 
.………………………….…….                                                            ……………………. 
AGYA KWADJO SEKYERE                                                             DATE 
 (10442283)  
 
 
 
 
 
 
 
 
 
 
 
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CERTIFICATION 
I hereby certify that this thesis was supervised in accordance with procedures laid down by 
University of Ghana, Legon.  
 
 
 
 
 
…………………………………….                                                  ………………… 
DR.  MAHMOUD A. MAHMOUD                                                   DATE 
(PRINCIPAL SUPERVISOR)  
 
 
 
 
………………………………… ……                                                …………………. 
PROF. BEDMAN NARTEH                                                                       DATE 
 (CO-SUPERVISOR)  
 
 
 
 
 
 
 
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DEDICATION 
I dedicate this work to the glory of God Almighty for his mercies endure forever. The 
grace of God has sustained me, strengthened and granted me wisdom to understand my 
research area and to complete the study as scheduled. I also dedicate this work to my  
ever-loving family and friends for their endless support and encouragement to overcome 
some challenges associated with the successful completion of the research. 
Moreover, this study is dedicated to all stakeholders within the insurance industry whose 
collective effort has provided the researcher with the needed response to complete this 
study.  
 
 
 
 
          
 
 
 
 
 
 
 
 
 
 
 
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ACKNOWLEDGEMENTS 
The road to higher height requires direction and foresight. The path of academia requires 
mentoring to better understand the practices of the academic community. I am very 
grateful for the support of my supervisors, Dr. Mahmoud and Prof. Narteh, whose 
direction and mentoring have contributed to the successful completion of this research. 
Their comments, constructive criticism and evaluation of all chapters of the study have 
improved the content, which is intended to serve the interests of stakeholders better. In-
spite of the busy schedules of my supervisors, they made time to constantly monitor the 
progress of the study and offer directions from time to time. 
In relation to the context of the study, I am grateful to the insurance community for their 
support towards its completion and to all policy-holders of the life insurance companies 
who accepted and completed the questionnaires. The responses from the policy-holders 
were useful in measuring the extent to which switching costs has influenced the 
relationship between customer satisfaction and loyalty in the life insurance industry.  
To all the lecturers and staff of the University of Ghana, my family, friends and all well-
wishers, I thank you all for the support and love extended to me through this academic 
exercise.  
 
 
 
 
 
 
 
 
 
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TABLE OF CONTENTS 
DECLARATION ................................................................................................................... i 
CERTIFICATION ................................................................................................................ ii 
DEDICATION .................................................................................................................... iii 
ACKNOWLEDGEMENTS ................................................................................................. iv 
TABLE OF CONTENTS ...................................................................................................... v 
LIST OF TABLES ............................................................................................................... xi 
LIST OF FIGURES ............................................................................................................ xii 
LIST OF ABBREVIATIONS & ACRONYMS ............................................................... xiii 
ABSTRACT ....................................................................................................................... xiv 
 
CHAPTER ONE ................................................................................................................. 1 
BACKGROUND OF THE STUDY ................................................................................... 1 
1.0 Introduction ................................................................................................................. 1 
1.1 Research Gaps ............................................................................................................. 5 
1.2 Research Problems ...................................................................................................... 6 
1.3 Research Objectives .................................................................................................... 7 
1.4 Research Questions ..................................................................................................... 8 
1.5 Significance of the Study ............................................................................................ 8 
1.6 Organization of the Study ............................................................................................ 9 
1.6.1 Chapter One .......................................................................................................... 9 
1.6.2 Chapter Two ....................................................................................................... 10 
1.6.3 Chapter Three ..................................................................................................... 10 
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1.6.4 Chapter Four ....................................................................................................... 10 
1.6.5 Chapter Five ........................................................................................................ 11 
1.6.6 Chapter Six ......................................................................................................... 11 
 
CHAPTER TWO .............................................................................................................. 12 
LITERATURE REVIEW ................................................................................................. 12 
2.0 Introduction ............................................................................................................... 12 
2.1 Customer Satisfaction ................................................................................................ 12 
2.2 Theoretical Background ............................................................................................ 16 
2.3 Customer Satisfaction and Social Exchange Theory ................................................ 17 
2.4 Antecedents of Customer Satisfaction ...................................................................... 18 
2.5 Relationship Marketing ............................................................................................. 20 
2.6 Relationship Quality .................................................................................................. 22 
2.7 Core Service Quality ................................................................................................. 27 
2.8 Tangibles in Service Delivery ................................................................................... 29 
2.9 Customer Loyalty ...................................................................................................... 29 
2.10 Switching Costs (Moderating Variables) ................................................................ 32 
2.10.1 Financial Cost ................................................................................................... 33 
2.10.2 Procedural Switching Cost................................................................................ 33 
2.10.3 Relational Switching Cost ................................................................................ 35 
2.11 Core Service Quality and Customer Satisfaction .................................................... 37 
2.12   Relationship Quality and Customer Satisfaction ................................................... 37 
2.13 Tangibles and Customer Satisfaction ...................................................................... 39 
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2.14 Customer Satisfaction and Loyalty ......................................................................... 39 
2.15 Moderating Effect of Switching Costs .................................................................... 40 
 
CHAPTER THREE .......................................................................................................... 43 
CONTEXT OF THE STUDY .......................................................................................... 43 
3.0 Introduction ............................................................................................................... 43 
3.1 The Geographic Location and Characteristics of Ghana ........................................... 43 
3.2 Historical Development of Insurance in Ghana ........................................................ 43 
3.3 Profile of Insurance Companies used in the Study .................................................... 45 
3.3.1 Vanguard Life Assurance Company Limited ..................................................... 45 
3.3.2 Gemini Life Insurance Company Limited (GLICO) .......................................... 46 
3.3.3 Enterprise Life Assurance Company Limited .................................................... 46 
3.3.4 StarLife Assurance Company Limited ............................................................... 47 
3.3.5 Provident Life Assurance Company Limited ..................................................... 48 
3.3.6 Metropolitan Life Insurance Ghana Limited ...................................................... 49 
3.3.7 SIC-Life Company Limited ................................................................................ 50 
3.4 Life Endowment Policy (Full Risk Policy) ............................................................... 51 
3.5 Risk Plus Investment ................................................................................................. 51 
3.6 Function of National Insurance Commission ............................................................ 52 
3.7 Players in the Life Insurance Industry ....................................................................... 53 
3.7.1 Insurance Brokers ............................................................................................... 54 
3.7.2 Insurance Agents................................................................................................. 54 
3.8 Regulation to Operate a Single Insurance Policy ...................................................... 55 
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3.9 Developments in the Insurance Industry ................................................................... 57 
3.9.1 Agricultural Insurance ........................................................................................ 57 
3.9.2 The Draft Insurance Bill ..................................................................................... 58 
3.10 Insurance Products in Ghana ................................................................................... 59 
3.11 Customer Challenges ............................................................................................... 60 
3.12 Contribution of the Insurance Industry to the Economy of Ghana ......................... 61 
 
CHAPTER FOUR ............................................................................................................. 63 
RESEARCH METHODOLOGY .................................................................................... 63 
4.0 Introduction ............................................................................................................... 63 
4.1 Purpose for Conducting Research ............................................................................. 63 
4.2 Research Approach .................................................................................................... 65 
4.3 Research Design and Strategy ................................................................................... 67 
4.4 Sampling and Sample Technique .............................................................................. 67 
4.5 Data Collection Methods ........................................................................................... 69 
4.6 Pre-testing the Questionnaire .................................................................................... 71 
4.7 Analysis of the Data .................................................................................................. 71 
4.8 Model Estimation and Measurement of Variables .................................................... 73 
4.9 Ethical Considerations for the Study ......................................................................... 75 
4.10 Limitations of the Study .......................................................................................... 76 
 
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CHAPTER FIVE ............................................................................................................... 77 
DATA ANALYSIS AND DISCUSSION OF FINDINGS .............................................. 77 
5.0 Introduction ............................................................................................................... 77 
5.1 Background/Demographic Information..................................................................... 77 
5.1.1 Gender ................................................................................................................. 78 
5.1.2 Age ...................................................................................................................... 78 
5.1.3 Level of Education .............................................................................................. 78 
5.1.4 Years on Policy ................................................................................................... 78 
5.1.5 Type of Policy ..................................................................................................... 79 
5.1.6 Biographic Data of Policy-holders ..................................................................... 79 
5.2 Reliability Analysis ................................................................................................... 80 
5.3 Testing for Multicolinearity ...................................................................................... 81 
5.3.1 Antecedents of Customer Satisfaction (Independent Variables) ........................ 81 
5.4 Core Service Quality ................................................................................................. 82 
5.5 Relationship Quality .................................................................................................. 82 
5.6 Tangibles in Service Delivery ................................................................................... 83 
5.7 Assessment of Customer Satisfaction, Loyalty and Switching Costs ....................... 83 
5.8 Customer Satisfaction ................................................................................................ 83 
5.9 Customer Loyalty ...................................................................................................... 84 
5.10 Switching Costs (Moderating Variables) ................................................................ 84 
5.10.1Financial Switching Cost ................................................................................... 84 
5.10.2 Procedural Switching Cost................................................................................ 85 
5.11 Significance Test ..................................................................................................... 86 
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5.11.1 Discussion of Major Findings ........................................................................... 86 
5.12 Objectives Test ........................................................................................................ 89 
5.12.1 Regression Test of the Antecedents of Customer Satisfaction ......................... 89 
5.12.2 Objective 1 ........................................................................................................ 90 
5.12.3 Objective 2 ........................................................................................................ 91 
5.12.4 Objective 3 ........................................................................................................ 92 
5.12.5 Objective 4 ........................................................................................................ 92 
5.12.6 Objective 5 ........................................................................................................ 93 
 
CHAPTER SIX ............................................................................................................... 100 
SUMMARY, CONCLUSIONS AND RECOMMNDATIONS ................................... 100 
6.0 Introduction ............................................................................................................. 100 
6.1 Summary ................................................................................................................. 100 
6.2 Major Findings ........................................................................................................ 101 
6.3 Conclusions ............................................................................................................. 104 
6.4 Implications for Managers ....................................................................................... 105 
6.5 Implications for Theory ........................................................................................... 105 
6.6 Study Limitations and Suggestions for Future Research ........................................ 106 
 
REFERENCES ................................................................................................................ 107 
APPENDIX ...................................................................................................................... 120 
Questionnaire ................................................................................................................. 120 
 
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LIST OF TABLES 
Table 1: ELAC Products (Life Policies) ............................................................................. 47 
Table 2: Starlife Products (Life Insurance Policies) ........................................................... 48 
Table 3: Provident Life Products & Services ...................................................................... 49 
Table 4: SIC-Life Policies ................................................................................................... 51 
Table 5: Life Insurance Companies in Ghana ..................................................................... 56 
Table 6: Products Approvals ............................................................................................... 59 
Table 7: Background Information on Respondents ............................................................ 79 
Table 8: Reliability Statistics .............................................................................................. 81 
Table 9: Results for Variance Inflating Factor .................................................................... 82 
Table 10: Descriptive Statistics ........................................................................................... 86 
Table 11: Pearson Correlation Test Results ........................................................................ 88 
Table 12: Regression Relation between Core Service Quality (CSQ), Relationship   
Quality (RQ), Tangibles (tan.) and Customer Satisfaction (CS) ........................................ 90 
Table 13: Regression Relation between Customer Satisfaction and Loyalty ..................... 93 
Table 14: Regression Model - Low and High Customer Perceive Switching Costs .......... 95 
Table 15: Stepwise Regression test ..................................................................................... 98 
Table 16: Summary of Hypothesis for the Study ................................................................ 99 
 
 
 
 
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LIST OF FIGURES 
Figure 1: Conceptual Framework ....................................................................................... 36 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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LIST OF ABBREVIATIONS & ACRONYMS 
CL -               Customer Loyalty 
CS -   Customer Satisfaction 
CSQ -             Core Service Quality 
ELAC - Enterprise Life Assurance Company Limited 
EA -              Enforcement Action 
FSC -             Financial Switching Cost 
GAIP - Ghana Agricultural Insurance Program 
GDP -   Gross Domestic Product 
Ghana-Re -     Ghana Reinsurance Company 
GLICO - Gemini Life Insurance Company Limited 
IAIS -  International Association of Insurance Supervisors 
Loy -  Loyalty 
MPCI - Multiple Peril Crop Insurance 
M -               Mean 
NIC -   National Insurance Commission 
N -                Number 
PSC -            Procedural Switching Cost 
RQ -  Relationship Quality 
SIC -  State Insurance Company 
SD -              Standard Deviation 
RSC -            Relational Switching Cost 
Tan.-  Tangible 
VIF -  Variance Inflating Factor 
WOM -  Word-Of-Mouth 
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ABSTRACT 
The number of players in the insurance industry in Ghana continues to growth. This is of 
concern to insurance companies in today‟s competitive market environment as it forces 
them to improve upon their offerings to retain their existing customers, as well as to 
acquire new ones. However, very few empirical studies have been conducted in the 
insurance industry to affirm the antecedents of customer satisfaction and its effect on 
loyalty. This study reports on the antecedents of customer satisfaction and loyalty, by 
moderating switching costs. An extensive review of literature was conducted to ascertain 
the variables and their measuring scales. The study used the social exchange theory to 
assess the satisfactory exchanges existing between insurance companies and policy-
holders. Customer responses were collected through the personal administration of 420 
questionnaires to policy-holders within the life insurance industry. The responses were 
analysed through the use of descriptive statistics, correlation and regression techniques. 
The study found both core service quality, tangibles and relationship quality to have a 
positive relationship with customer satisfaction. Similarly, customer satisfaction was 
found to have a positive and strong association with loyalty. Subsequently, the significant 
effect of high switching costs was established, which influenced satisfied customers to 
remain loyalty in the life insurance industry of Ghana. In effect, customer satisfaction is a 
vital tool for businesses. However over-concentration on customer satisfaction may not be 
enough to influence loyalty. Businesses should consider the relative importance of 
switching costs in influencing customer loyalty in the life insurance industry. 
 
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CHAPTER ONE 
BACKGROUND OF THE STUDY 
1.0 Introduction 
The concept of customer satisfaction is a concern to businesses operating in a competitive 
business environment and the attainment of customer satisfaction remains the central 
focus (Oliver, 1999). This is because the outcome of customer satisfaction may influence 
business performances positively or negatively. The performance of insurance companies 
has been influenced by customer loyalty, which is largely dependent on premium 
collection and profitability (Anton, Camarero & Carrero, 2007). Similarly, it has been 
established that the high retention rate of customers has a strong relationship with better 
financial performance (Reichheld & Sasser, 1990). The impact of customer loyalty in the 
insurance industry is associated with continuous growth and survival in today‟s market 
economy.  
 
Existing literature on marketing has confirmed the relevance of customer satisfaction as 
an antecedent to customer loyalty (Bitner, 1990; Oliver, 1999).Some scholars have 
confirmed the significant effect of core service quality, relationship quality and tangibles 
to customer satisfaction (McDougall & Levesque, 2000; Chen & Wang, 2009; Narteh & 
Kuada, 2014). Developments in marketing require businesses not to only concentrate on 
customer satisfaction strategies but also to develop switching barriers in their offering. 
This will limit customers‟ decision to defect to other providers. Customer defection in the 
service industry can influence their performance (Keaveney & Parthasarathy, 2001). 
Hence, service providers should be mindful of the effect of customer defection and 
improve upon their services delivery. 
 
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The extent to which customer satisfaction influences loyalty may vary in relation to 
different switching barriers as perceived by the consumer (Colgate & Lang, 2001). Most 
industries continue to experience growth in the number of industry players, which 
requires businesses to be proactive in satisfying changing consumer needs. This requires 
successful companies to strive for more than just a competitive advantage in customer 
service to retain customer (Hinson, Mohammed & Mensah, 2006). Businesses can remain 
competitive by improving upon their core service delivery and relationship building with 
their customer. Building a relationship with customers begins with customer service 
management, which requires addressing customer concerns through interactions with the 
service providers, while developing an effective customer database of exchanges to 
enhance a long lasting business relationship that will benefit all stakeholders (Frow & 
Payne, 2009). This will aid service providers to achieve customer loyalty, which is a 
strategic tool for the growth and profitability of businesses (Reichheld & Sasser, 1990). 
 
The insurance sector contributes immensely to the growth and sustainability of most 
economies worldwide (Feyen, Lester & Rocha, 2011). Insurance service delivery can be 
described as the transfer of risk to indemnify losses, which policy-holders might suffer in 
future. Insurance can be described as a pool of funds from several insured entities that 
offers protection against the economic impact of an untimely death, ill health, accidents, 
funerals and education (Boadu, Dwomo-Fokuo & Frimpong, 2014).  This concept of risk 
reduction has influenced patronage of insurance products in most developed countries. 
The general public has become interested in securing insurance for most of their assets 
such as cars, houses, life, education and basic domestic tools (Klose, 1993).The insurance 
industries across the world continues to experience accelerated growth in their service 
offerings to the general public. The global insurance sector has recorded an increase of 82 
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percent on real premium between 1997 and 2004. This performance constitutes 104 
percent of life insurance and 60 percent of non-life insurance, which represents an 
increase in revenue from $ 1.6 trillion to $ 2.9 trillion between 1997 and 2004 (Arena, 
2006). Despite its impact, very few empirical studies have been conducted in the 
insurance sector (Guillen, Nielsen & Pérez-Marín, 2008). 
In developing economies, the patronage of insurance services continues to increase 
relative to developed economies (Arena, 2006). This increase has been made possible by 
the liberalization of the financial sector after the structural adjustment reforms in most 
developing countries (Arena, 2006).  
 
The Ghanaian insurance industry is made up of life and non-life insurance sectors 
(National Insurance Commission Report, 2013). The separation of the insurance industry 
in Ghana was to satisfy the regulations of the National Insurance Commission (NIC Act, 
2006) in relation to the provisions of the International Association of Insurance 
Supervisors (IAIS Report, 2011). The reforms and continuous education of the relevance 
of insurance is stimulating interest and patronage among the general public. In Ghana the 
insurance sector continues to experience growth in total premium collection, while its 
contribution to Gross Domestic Product (GDP) is still less than two percent (NIC, 2013). 
In-spite of these developments, the life insurance sector has a vast potential for growth in 
the Ghanaian market (NIC, 2013).The sector continues to experience growth in the 
number of industry players and their associated product offerings (NIC, 2013). This has 
resulted in competition among players, which challenges service providers to improve 
upon their services. 
 
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Moreover, the National Insurance Commission of Ghana periodically receives some 
complaints relating to service delivery and customer satisfaction (NIC, 2013). These 
complaints might influence customer repurchase intention. In administering their 
regulatory duties, the Insurance Commission received 312 complaints from the public by 
the year ending 2013 (NIC, 2013). This expression of customer dissatisfaction did not 
significantly affect customer defection level with policy-holders within the industry. The 
life insurance industry recorded 113 official complaints while the non-life insurance 
industry recorded 199 complaints concerning service delivery. The challenge faced by the 
insurance companies is how to improve customer satisfaction in their service delivery and 
to win customer trust. The cost associated with delivering services in insurance is usually 
high due to its resource mobilization to indemnify policy-holders for any losses they may 
suffer. This sector requires policy-holders to maintain their policy with the existing 
service provider for some years to recover it cost, since switching providers may lead to 
losses and limit the operations of the providers. Moreover, existing literature confirms the 
relevance of customer satisfaction on loyalty (De Wulf, Odekerken-Schro¨der, & 
Iacobucci, 2001).  
 
The life insurance sector has relatively long term policies as compared to general 
insurance, which usually has a contract term of one year subject to renewal. In order to 
measure the extent of the relationship between service providers and policy-holder, it is 
ideal to concentrate on the life insurance sector, which offers full risk policies and risk 
plus investment policies. The full risk policies are the various life insurance policies that 
are relatively long term in nature as compared to the risk plus investment policies. The 
investment policies offered by the insurance companies are relatively different from the 
investment portfolios of the regular commercial banks. The investment offered by the 
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insurance companies has the risk components embedded in the policy. This means that 
should the policy-holder suffer any loss or incapacitation before the investment policy 
matures, the insurance company will have to continuously pay the premium on behalf of 
the policy-holder and eventually pay the full sum assured when due. The developments in 
the insurance industry presents the opportunity to examine the relationship between 
customer satisfaction and loyalty in relation to switching cost associated with service 
delivery. The Ghanaian life insurance industry will be used to explain the assertion that 
relationship quality can pay off when customers have a long-term perspective and there 
are perceived high costs for switching supplier (Zineldin & Philipson, 2007). 
 
 1.1 Research Gaps 
The concept of customer loyalty is a relevant area of study in marketing. This concept has 
been studied in different contexts across the world. These include the telecommunication 
industry (Ranaweera & Prabhu, 2003; Kim, Park & Jeong, 2004) banking (Baumann, 
Elliot & Hamin, 2011; Fraering & Minor, 2013); on-line services (Chen & Hitt, 2002; 
Chang & Chen, 2008); insurance (Crosby, Evans & Cowles, 1990; Chen & Wang, 2009); 
airline (Chang & Chen, 2007) and health (Choi & Kim, 2013). 
 
In relation to switching cost, most of the studies seem to be concentrated in the developed 
economies (Burnham, Frels & Mahajan, 2003; Chen & Wang, 2009). In developing 
countries like Ghana, most studies have been conducted in relation to customer 
satisfaction and/or loyalty in the banking sector (Hinson, Owusu-Frimpong & Dasah, 
2009; Narteh & Owusu-Frimpong, 2011; Anabila, Narteh, Tweneboah-Koduah, 2012; 
Narteh, 2013; Oduro, 2013; Narteh & Kuada, 2014). In relation to studies on customer 
satisfaction and loyalty in the insurance industry, very little has been done in Ghana.  
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Further review of the literature has confirmed that, some studies have been conducted in 
the Ghanaian insurance industry but not relating to customer satisfaction and loyalty 
(Akotey, Osei & Gemegah, 2011; Ansah-Adu, Andoh & Abor, 2011; Boadu et al., 2014). 
Moreover, of the studies conducted and identified in Ghana none have addressed the 
moderating role of switching costs in customer satisfaction and loyalty.  
 
1.2 Research Problems 
According to Creswell (1994), research problems are issues that exist in literature, theory 
or practice, which provides direction for the need to conduct a study. This has informed 
the research in arriving at the problem statement for the study. 
 
Some studies have confirmed the antecedents of customer satisfaction to core service 
quality, relationship quality and tangibles but have been mostly limited to the banking 
industry (Colgate & Lang, 2001; Fraering & Monor, 2013; Narteh & Kuada, 2014). The 
concept of customer satisfaction and loyalty is linked together but the relationship varies 
in relation to different switching barriers and/or from industry to industry. 
 
Some studies have moderated switching costs in the relationship between customer 
satisfaction and loyalty but these are limited to developed countries (Chen & Wang, 2009; 
Burnham et al., 2003). The relative strength of switching costs in the relationship will 
determine the extent to which customers remain loyal with their existing service 
providers. Existing literature has confirmed switching costs has been classified into 
relational, procedural and financial cost (Burnham et al., 2003; De Matos, Henrique & De 
Rosa, 2009).  
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In any exchange, the relationship between a service provider and a customer results in 
perceived cost of switching to an alternative service provider (Burnham et al., 2003). The 
consumer‟s perceived switching cost gives the current service provider a degree of market 
power over their subsequent purchase. The extent to which existing customers repeat 
purchases with the current service provider depends on the customer‟s perceived 
switching cost. This means that when consumers perceive the switching cost to be high, it 
will influence their retention. Few studies conducted within the insurance industry have 
considered the relevance of the switching costs to influence satisfaction and loyalty and 
this has resulted in an over-emphasis on the significance of satisfaction in the financial 
sector (Fornell 1992; Narteh & Kuada, 2014).  
 
This study therefore seeks to identify the relationship between customer satisfaction and 
loyalty in the delivery of services by moderating the switching costs in the Ghanaian life 
insurance industry.  
 
1.3 Research Objectives 
In order to evaluate the antecedents and outcome of customer satisfaction in the life 
insurance industry of Ghana the following objectives have been set based on the 
background of the study, research gaps and research problem:  
1.  To identify the relationship between core service quality and customer satisfaction in 
the Ghanaian life insurance industry; 
2. To examine the relationship between relationship quality and customer satisfaction in 
the Ghanaian life insurance industry; and 
3. To identify the relationship between tangibles and customer satisfaction in the life 
insurance industry; 
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4. To determine the relationship between customer satisfaction and loyalty in the 
Ghanaian life insurance industry; and 
5. To identify the impact of a perceived high switching costs on the relationship between 
customer satisfaction and loyalty in the Ghanaian life insurance industry. 
 
1.4 Research Questions 
On the bases of the research objectives the following questions were developed: 
1. What is the relationship between core service quality and customer satisfaction in the 
Ghanaian life insurance industry? 
2. What is the relationship between relationship quality and customer satisfaction in the 
Ghanaian life insurance industry? 
3. What is the relationship between tangibles and customer satisfaction in the life 
insurance industry? 
4. What is the relationship between customer satisfaction and loyalty in the Ghanaian life 
insurance industry? 
5. What is the impact of perceived high switching costs on the relationship between 
customer satisfaction and loyalty in the Ghanaian life insurance industry? 
 
1.5 Significance of the Study 
This research seeks to contribute to literature on customer satisfaction and loyalty in the 
life insurance industry of Ghana. The outcome of the study will provide insight and 
appropriate recommendations for strategic decision making. This will ensure success in 
the delivery of insurance services. This study will rely on existing literature to develop a 
framework to explain the relationship between customer satisfaction and loyalty in the 
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insurance industry. The outcome of this study will, however, serve as reference for future 
study on customer loyalty.  
 
Moreover, the research will explain the relative strength of the relationship between 
customer satisfaction and loyalty in the Ghanaian insurance industry. This will be useful 
to managers of insurance and other relevant institutions. Existing literature on customer 
satisfaction and loyalty has given a strong indication of the need for more studies in 
developing economies with regards to the insurance industry. This is relevant since 
culture, beliefs and values differ from one geographic region to another. Therefore 
adopting recommendations of studies conducted in developed countries may not be 
applicable to some sectors operating in the developing economies. Hence, the need to 
develop a framework to explain the concepts of customer satisfaction and loyalty and 
recommend appropriate strategies to promote customer repurchase behaviour in the 
Ghanaian insurance industry.  
 
 1.6 Organization of the Study 
This study is presented in six chapters to evaluate the extent to which the switching costs 
influence the relationship between customer satisfaction and loyalty.  
 
1.6.1 Chapter One 
The first chapter introduces the study, which consist of the background of the insurance 
industry in relation to customer satisfaction and loyalty. The study identified 
developments in the world of insurance, relative to those of developing countries, 
especially Ghana. Similarly, research gaps were identified from which the research 
problem was deduced. The research objectives stated are intended to be achieved by the 
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end of the study. The significance of the customer satisfaction and customer loyalty in the 
Ghanaian insurance industry was identified and stated.  
 
1.6.2 Chapter Two 
The second chapter reviews existing literature on the relationship marketing, core service 
quality, relationship quality, tangibles, customer satisfaction, customer loyalty and 
switching costs. Additionally the theory of social exchange has been explained as a basis 
for evaluating customer satisfaction. Finally, the conceptual framework has been 
presented in a pictorial manner for easy reference of the variables to be studied.  
 
1.6.3 Chapter Three 
The third chapter examines the context of the insurance industry in relation to the number 
of industry players, their performance in relation to premium collection, and why the 
division in the operation of the insurance industry to either life or general and not both 
services. Additionally the functions of the NIC and how complaints of customers are 
handled and their impact on the service provider have been discussed. The profile of 
companies who agreed to be part of the study as well as their products has been 
documented. 
 
1.6.4 Chapter Four 
The fourth chapter will explain the methodology adopted in the study. The sample size 
and technique for selecting the samples for the study has been explained. The study has 
adopted the quantitative approach to research since it intends to measure the extent to 
which customer satisfaction influences loyalty rather than provide insight into the 
phenomena. Additionally, the base for analyzing the research has been explained with 
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both regression and correlation analyses being employed in the study as well as the use of 
descriptive analysis. 
  
1.6.5 Chapter Five 
The fifth chapter focuses on data analysis and a discussion of the findings. The Statistical 
Package for the Social Sciences (SPSS) statistical tool was used in the analysis. The 
analysis was presented by means of illustrations and tabulations to easily explain the 
various variables and the effect of their relationship with the others. An explanation has 
been given for the illustrations and will be supported by literature to justify the 
appropriateness of the study to stakeholders.  
 
1.6.6 Chapter Six 
The sixth chapter summarizes the study based on the findings from the insurance industry, 
by drawing conclusions and providing appropriate recommendations to stakeholders on 
how best to improve on customer satisfaction and loyalty while considering the relative 
importance of switching costs in the life insurance. 
 
 
 
 
 
 
 
 
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CHAPTER TWO 
LITERATURE REVIEW 
2.0 Introduction 
This chapter reviews existing literature on customer satisfaction, loyalty and switching 
costs. The theoretical foundation for the study is the social exchange theory, which will be 
explained generally and related to the insurance industry. This study assesses customer 
satisfaction in the Ghanaian life insurance industry from core service quality, relationship 
quality and tangibles associated with service delivery. These variables are explained to 
demonstrate their appropriateness within the study. The relevance of switching costs is 
explained in relation to customer loyalty, which was done through literature review to 
categorize the switching costs elements into variables that can be easily evaluated. This 
provides a strong theoretical basis for the concept and development of an appropriate 
framework to evaluate the relationship in the study. The chapter demonstrates the extent 
to which research on this subject have been conducted in different contexts and the need 
for this study on the Ghanaian life insurance industry. 
 
2.1 Customer Satisfaction 
In marketing literature, customer satisfaction refers to the extent to which actual service 
delivery equals customer perception of expected performances in an exchange encounter 
(Oliver, 1996). When customers are satisfied with the service offerings of a service 
provider they tend to repurchase the product or service in the future. Subsequently, 
Oliver, (1999) described satisfaction as a customer‟s judgment that the consumption of a 
product or service is providing a pleasurable level of fulfillment to the customers‟ needs, 
desires and goals. 
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The concept of customer satisfaction has been described from the cognitive, affective and 
composite perspectives. Some scholars have described customer satisfaction as a 
cognitive based approach to customers‟ evaluation of products and services (Mano & 
Oliver, 1993). According to the cognitive based perspective, customer satisfaction occurs 
from the rational evaluation of the product or service performance in relation to pre-
purchase expectations. The level of customer satisfaction can be explained by the extent 
of customer disconfirmation, which is usually explained as the difference between post-
purchase and post-usage evaluation of the performance of the product or service in 
relation to the prior expectations held before the purchase (Molina, Martin-Consuegra & 
Estabeban, 2007). In the evaluation process, the customer may be highly satisfied or 
delighted when the perceived performance of the product or service exceeds customer 
pre-purchase expectation. This is referred to as a positive disconfirmation (Fournier & 
Mick, 1999). Moreover, the customer may experience a negative disconfirmation when 
the post purchase performance falls below the pre-purchase expectation (Oliver, 1999). 
Similarly, a customer may experience a simple disconfirmation when the post-purchase 
and post-usage performance is equal to pre-purchase expectations (Oliver & DeSarbo, 
1988). According to Mano and Oliver, (1993), satisfaction can be explained as a cognitive 
comparison of expectations prior to consumption with the actual experience.  
 
The affective perspective of customer satisfaction has been explained as the customer‟s 
feelings resulting from the post-usage evaluation of products or services which may 
influence customer satisfaction positively or otherwise (Liljander & Strandvik, 1997; 
Olsen, 2002). The affective perspective of customer satisfaction has been mainly reliant 
on customers‟ feelings in relation to post-usage performance. This assertion makes the 
definition of Tsiros, Mittal and Ross (2004) relevant in explaining customer satisfaction 
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as a person‟s feelings of pleasure or disappointment which result from comparing a 
product‟s perceived performance against expectations. Similarly, satisfaction has been 
described as the emotional state resulting from a customer‟s interactions with a service 
provider over time (Crosby et al., 1990). 
 
The composite perspective of customer satisfaction has been described as the combination 
of a cognitive and affective construct to better explain customer satisfaction. This implies 
that the customer may assess the satisfaction level of products or services through the 
combination of rational evaluation and feelings resulting from post-usage of the products 
or services. According to Lin (2003), customer satisfaction is the outcome of a cognitive 
and affective evaluation of comparison between expected and perceived performance, 
which is based on the customers own evaluation of products and services.  
 
Satisfaction has been described as transaction-specific and cumulative satisfaction 
(Anderson, Fornell & Lehmann, 1994; Kim & Yim, 2014).Transaction-specific can be 
evaluated from the customers as they encounter a particular service provider, which can 
influence their judgment about the usage of the product or service. The transaction-
specific approach has been described as the emotional response from a customer‟s post-
usage experience (Oliver, 1993). Cumulative satisfaction can be evaluated from the 
customers‟ perspective, which will be based on the firm‟s past, current and future 
performance. The cumulative approach has been described as the overall satisfaction 
perspective based on the customer‟s cumulative evaluation response (Kim & Yim, 2014). 
 
The concept of customer satisfaction is perceived from the customer‟s perspective. The 
extent of satisfaction from a service encounter may vary from one customer to the other. 
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The competitive marketing environment in which businesses operates presents the 
customer with choices. Customer taste and preferences for goods and services continue to 
change. The challenge presented is the ability of businesses to continuously provide 
services intended to satisfy their customers to remain loyal, since unsatisfied customers 
may want to explore or experience alternative services available in the market.  
 
In the business to business context, customer satisfaction has been described from the 
perspective of the buyer and seller as the evaluation of all the positive affective states 
resulting from the interactions and exchanges which will be fulfilling, gratifying and easy 
(Gassenheimer, Houston & Davis, 1998; Cater & Zabkar, 2008). Customer loyalty has 
therefore become a source of competitive advantage for businesses. Maintaining the 
competitive advantages of customer loyalty requires continuous improvement in core 
service quality by promoting friendship in service encounters (Butcher, Spark, & 
O‟Callaghan, 2003).  
 
The growth of service industries has contributed to improved interaction between 
customers and service providers, which influences the outcome of service delivery. 
Customer satisfaction is perceived to result in loyalty. However, this assumption that 
satisfaction and loyalty is positively related is not always the same for all industries 
(Stewart, 1997). A study on customer satisfaction revealed that 65 to 85 percent will 
switch to other service providers even though they admitted they were satisfied or very 
satisfied (Reichheld, 1996).This implies that mere satisfaction is not enough for the 
continuous growth and survival of businesses, rather businesses must strive to translate 
satisfaction into loyalty. This study will evaluate satisfaction from the cumulative 
approach to assess customer satisfaction from the composite perspective. 
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2.2 Theoretical Background 
The social exchange theory is explained in relation to how parties enter into and maintain 
exchange relationships with others with the expectation that doing so will be rewarding 
(Blau, 1964). This means that the relationships we choose to create and maintain are the 
ones that maximize our rewards and minimize our cost. The theory examines two parties‟ 
mutually complementary arrangements that ensure equity and fairness (Molm, 1994).  
 According to the theory, parties cannot be independent, but rather must be interdependent 
to maximize their benefits through exchange. This means that exchange relationships that 
give us the most benefits for the least amount of effort are the ones we value the most and 
are likely to keep long-term. Similarly, the exchange of benefits or reciprocal exchange 
has been explained as one‟s action, which is contingent on the other party‟s behaviour 
(Molm, Takahashi, & Peterson, 2000). According to Kotler (1994), exchange is defined as 
the act of obtaining a desired product from someone by offering something in return, 
which is beneficial and can satisfies their need.  
 
The theory assumes that; 
self-interested parties transact or exchange with self-interested others in order to 
accomplish outcomes that neither could have achieved on their own (Lawler & Thye, 
1999). This implies that relational exchanges would cease as soon as they are not 
perceived to be mutually rewarding by both parties. 
The resources in the exchange relationship can be economic or social or both. The 
economic resources have been described as tangible items such as goods, information and 
services while social resources includes intangible items such as social amenities, 
friendship and prestige. The most rewarding outcome in a social exchange relationship 
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includes social approval and respect, which does not have any material value for which 
price can be, determined (Blau, 1964).  . 
 
The relevance of trust in the marketing literature has been widely considered as a vital 
component in the exchange process (Crosby et al., 1990). Subsequently, trust and a 
commitment relationship has been recognized as essential attributes of relationship 
quality which influences satisfaction in exchange relationships (Morgan & Hunt, 1994).  
    
2.3 Customer Satisfaction and Social Exchange Theory 
In the Ghanaian life insurance industry, actual exchanges between the policy-holder and 
service provider do not take place immediately, but rather in the near future when the 
policy-holder suffers any losses for which a policy have been purchased. Policy-holders 
will be satisfied when an insurance claim received is equal to customer perception of 
expected performances in relation to indemnifying the losses suffered.  
 
In relation to the theory; 
self-interested parties transact or exchange with self-interested others in order to 
accomplish outcomes which neither party could have achieved on their own (Lawler & 
Thye, 1999). This means policy-holders (customers) will transact or exchange (premiums) 
with self-interested others (insurance company) in order that their losses will be 
indemnified. 
 
These exchanges would cease as soon as they are not perceived to be mutually rewarding 
by both parties (Lawler & Thye, 1999). Relational exchange in the delivery of life 
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insurance may cease when they are perceived not to be mutually rewarding to policy- 
holders. This is applicable if policy-holders consider the switching costs to be low. 
 
The resources exchange can be described as economic. The economic resources have 
been described as tangible items such as goods, information and services. The life 
insurance industry offers services in the form of policy intended to indemnify policy- 
holders for any losses they might suffer in future. 
 
In this regard, if the policy-holders of life insurance do not perceive the exchange 
relationship to be rewarding, then it might influence their decision. This assertion is 
consistent with Molm et al., (2000), which explains that the exchange of benefits or 
giving something to a recipient that is more valuable to the recipient than it is to the giver, 
can be described as the human behaviour which results in satisfaction.  
 
This study therefore intends to assess the relationship between customer satisfaction and 
loyalty in the life insurance industry from the social theory perspective. Moreover, the 
concept of satisfaction and loyalty are linked together, but their relationship is 
asymmetric. The relationship has made satisfaction an unpredictable variable to loyalty 
due to the different sectors in which businesses operate and the ever-changing consumer 
behaviour. 
2.4 Antecedents of Customer Satisfaction 
The conceptualization of service quality has received considerable attention and debate as 
to actual dimensions in relation to satisfaction quality (Cronin & Taylor, 1992; Brown, 
Churchill, & Peter, 1993). Evidence from literature, however, suggests that there may be 
three over-riding dimensions of customer satisfaction, which include the core or outcome 
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aspects of the service, the relational or process aspects and the tangible attributes of the 
service (Parasuraman, Berry & Zeithaml, 1991; McDougall & Levesque, 2000; Narteh & 
Kuada, 2014).  
 
The core service refers to the basic product or service being purchased or contracted 
(Morgan & Piercy, 1992; McDougall & Levesque, 2000). Core service quality has been 
described as the tangible attributes and intangible technical services in exchange 
relationships (Parasuraman, Zeithaml & Berry, 1985).  
 
The relational aspect seeks to explain the relationship between the customer and 
employee in the process of service delivery. In service encounters, there exists interaction 
between the customer and the provider to ascertain the concern or needs of the customer 
and address those concerns (McDougall & Levesque, 2000). This stage can be described 
as the service delivery process where relationship quality plays a critical role to determine 
the client‟s actual needs.  
Tangibles associated with service delivery are the physical appearance of employees, the 
ambience and the physical attributes of service delivery. 
 
In relation to the life insurance industry, core service quality has been described as the         
services associated with the various life insurance policies offered on the Ghanaian 
market with its promise to indemnify losses of policy-holders. The policies may include 
full risk and risk plus investment. The relationship aspects are the quality of interaction 
between the sales-person or agent and the customer or policy-holder, while tangibles 
relates to the physical attributes associated with service delivery. 
 
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The study replicates the antecedents of customer satisfaction, which includes core   
service quality, relational quality and tangibles. Subsequently the relationship between 
customer satisfaction and loyalty are assessed by moderating switching costs in the 
Ghanaian life insurance industry.  
 
2.5 Relationship Marketing 
In marketing literature, the relevance of relationship marketing evolved from the field of 
service marketing and industrial marketing (Berry, 1983; Christopher, Payne & 
Ballantyne, 1991). The origin of the concept of relationship marketing can be traced to the 
literature on marketing services (Berry, 1983).Contrary to the origin of relationship 
marketing in the early 1980s, other scholars are of the view that relationship marketing 
was a rediscovery, since it had formed the bases of most successful businesses (Payne, 
1995). In academic literature, however, the concept of relationship marketing was 
developed from the contribution of Berry (1983).This formed the basis for the 
conceptualization of relationship marketing and defined the concept as attracting and 
maintaining customers through service delivery by enhancing customer relationships. The 
definition given by Berry clearly depicts the paradigm shift from transaction marketing to 
that of relationship marketing, since his idea was not short term focus (attract and sell) but 
rather to maintain and enhance customer relationship, which is long term oriented. 
 
Scholars in marketing, developed the concept of relationship marketing based on the 
rediscovery of marketing as a cross-functional approach and not as a department or unit in 
businesses (Zineldin & Philipson, 2007). The ability of businesses to maintain and 
enhance the relationship in businesses requires the entire business operation to interrelate 
rather than operate in isolation. 
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Several subsequent scholars developed upon Berry‟s concept. According to Gronroos 
(1994), relationship marketing is defined as the process of identifying and establishing 
customers by maintaining, enhancing and when necessary, terminating relationships with 
customers and other stakeholders, at a profit, so that the objectives of all parties involved 
are met, through mutual exchange and fulfillment of promises. Similarly, the concept of 
relationship marketing has been defined by Morgan and Hunt (1994) to mean all 
marketing activities directed towards establishing and developing customers as well as 
maintaining successful relational exchanges beneficial to all parties. In a study to review 
several definitions by scholars in relationship marketing, Harker (1999) defined 
relationship marketing as the means by which organizations engage in proactively 
creating, developing and maintaining committed customers, through interactive and 
profitable exchanges with selected customers which has long term perspective. Similarly, 
Sheth and Parvatiyar (2000) described relationship marketing to be an ongoing process of 
engaging in cooperative and collaborative exchanges as well as programs with immediate 
and end-user customers to enhance mutual economic value at reduced cost. 
 
The definitions above emphasize maintaining and enhancing customer exchanges rather 
than concentrating on attracting new customers. This is essential since loyal customers 
may serve as referrals for new customers and such customers tend to be loyal (Zineldin, 
2006). The literature on relationship marketing has also established that the mutual 
exchanges should be beneficial to all stakeholders.  
 
Existing literature has established the benefits associated with relationship marketing to 
businesses. These benefits are assessed from the consumer and service provider 
perspective. Businesses may benefit from the practices of relationship marketing through 
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customer loyalty and word-of-mouth referrals (Sheth & Parvatiyar, 2000; Kim & Cha, 
2002).Similarly, business can also benefit from employee retention (Zeithaml, Berry, & 
Parasuraman,1996).Relationship quality has been described from the customers 
perspective as customers‟ perceptions as how well exchange relationships fulfils customer 
expectations, predictions, goals and desires (Jarvelin & Lehtinen, 1996).  
 
2.6 Relationship Quality 
Relationships are built between the service provider and the customer; however, an 
individual employee manages the accounts of customers. The establishment of an 
interpersonal relationship between customer contact employees and the customer is vital 
to ensure customer satisfaction and establishing a long term relationship. In the life 
insurance industry, policies are primarily sold by salespersons or insurance agents, who 
are usually in touch with the customer (Crosby et al., 1990). The relevance of relationship 
quality, which can be expressed through the quality of interpersonal interaction between 
the customer and salesperson, can be described as the service characteristics of 
inseparability (Bitner, 1992).   
 
Crosby et al., (1990), developed a model based on two constructs to explain relationship 
quality. The two constructs of relationship quality includes trust in the sales-person 
(Swan, Browers & Richardson, 1999) and satisfaction with the sales-person (Crosby et 
al., 1990; Parsons, 2002). According to Purchasing (1984), product or market knowledge 
has been considered as the most important criteria in determining customer satisfaction 
with the sales-person in exchange relationships. This implies that both trust in the sales-
person and satisfaction with the sales-person (competence) will constitute relationship 
quality.  
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Similarly, relationship quality has been conceptualized as trust and commitment in 
literature (Morgan & Hunt, 1994). Marketing literature has confirmed trust to be a vital 
component in developing a successful relationship (Morgan & Hunt, 1994; Ndubisi, Chan 
& Chukwunonso, 2004; Narteh, 2013).  
 
The term trust has been defined by Moorman et al., (1993) as a customer‟s willingness to 
rely on an exchange partner in whom one has confidence.  Trust has also been described 
as making and keeping promises (Bitner, 1995). Making and keeping promises is based 
on trust and the quality of interaction between the customer and employee, which requires 
the service provider or sales-person to be reliable in the delivery of core services. 
 
In the life insurance industry the promise of companies is to indemnify the policy-holder 
for any losses they suffer after taking out a policy cover. This policy can be in the form of 
a funeral policy, education policy or travel policy. The insurance company‟s ability to 
perform the promise immediately and with accuracy remains a challenge to all insurance 
companies. Reliability has been found to have the strongest determinant of customer 
loyalty (Wolfinbarger & Gilly, 2003). 
 
Trust in a sales-person over time can influence customer commitment in an exchange 
relationship. Social exchange theory can be used to explain trust and commitment 
relationships through the principle of generalized reciprocity, which holds that mistrust 
from one party may result in mistrust by the other party, which leads to a decreased 
commitment in the relationship (McDonald 1981). This implies that mistrust in the 
relationship may reduce customer satisfaction, since the perceived cost of mistrust may be 
more than the benefit associated with the exchanges that might affect future exchanges. 
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The assertion supports the fact that trust is a determinant of relationship commitment 
(Achrol, 1991; Morgan & Hunt, 1994).  
 
In today‟s business environment, a customer is willing to patronize the offerings of a 
service provider when they perceive the service provider has demonstrated a high level of 
commitment in their service delivery. Parasuraman et al., (1991) described commitment 
in relationships as building on the foundation of mutual commitment. Customers therefore 
value the extent to which customer contact employees remain committed and this may 
influence customers‟ continuous exchanges.  
 
Customer trust in sales-persons has a future contingency orientation that requires 
competence to reduce customer vulnerability in relational exchanges (Swan et al., 1999). 
Similarly, some scholars argued that trust may be stronger in the early stages of the 
relationship when customers lack familiarity or expertise in the offering of the service 
provider (Verhoef, Francis & Hoekstra, 2002). This may require competence in the 
delivery of services by the sales-person. In relational quality, the customer assesses how 
efficiently the sales-person can satisfy their needs. According to Ndubisi et al., (2007), 
competence can be defined as the buyer‟s perception of the supplier‟s technological and 
commercial competence.  
 
Competence in service delivery can be referred to as the organizational strength from the 
customer‟s view-point, in the form of resources and technology to deliver services 
relatively better than competitors. The level of organizational competence displayed by 
the service provider may influence customers to be committed and repurchase the 
offerings of the service provider (Aldlaigan & Buttle, 2005). These perceived 
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competences should reflect in the sales-person‟s skill and technical knowledge associated 
with the service offering. Competence means skills, training and technical knowledge 
developed in relation to services to be rendered to customers and the general public (Kim 
& Cha, 2002). In the banking sector competence has been defined as the ability of the 
bank to serve customers well (Ndubisi et al., 2004). 
 
 Trust requires effective communication and should modify behaviour and translate 
actions into response specific action (Narteh, 2012).The term has been described in 
relationship marketing as keeping in touch with valued customers, providing timely and 
trustworthy information on services and service changes and communicating proactively 
if a delivery problem occurs (Ndubisi & Wah, 2005). Businesses can effectively promote 
their services through effective communication by several mediums available (Ndubisi, 
2006). In relation to service failure, service providers have the opportunity to inform 
affected customers of the pragmatic steps adopted to rectify such events and to prevent 
that from occurring in the future (Ndubisi, Wah & Ndubisi, 2007). Effective 
communication therefore, is a vital attribute of relationship quality that can influence 
customer loyalty in the service industry (Narteh, 2009). Conflict handling has been 
described as an attribute of relationship quality that influences customer loyalty (Ndubisi 
et al., 2007).  
 
The relevance of trust and relationship quality has been established as a mediator between 
relationship marketing practices, namely competence, conflict handling, communication 
and commitment, which eventually influences loyalty in the banking industry (Ndubisi et 
al., 2007). 
 
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In selling insurance policies, service providers or customer contact employees have to 
explain the terms of the policies being sold as well as the terminologies associated with 
insurance to prospective policy-holders. This is necessary to clear any form of ambiguities 
associated with the policy they are about to take. 
 
Competence in the insurance industry has been referred to as the insurer‟s ability to pay 
claims as promised and manage the policy-holders‟ database effectively. The extent to 
which the insurer can be considered as competent will be evaluated by the customer and 
this will influence customer trust in the sales-person‟s ability to deliver effective service, 
while competence in the banking industry has been expressed as customer confidence and 
security in the operations of the bank for which the interest of customers is assured 
(Kumra & Mittal, 2004). From the customers‟ point of view, betrayal of this trust by the 
service providers that can lead to defection (Ndubisi et al., 2004).Similarly, trust expected 
from the service provider is usually entrusted in the customer contact employee who links 
the customer to the organization (Zeithaml, Bitner & Gremler, 2006). 
 
The insurance industry provides an avenue for insured persons to be indemnified for 
losses they might suffer in future by paying regular premiums to the service providers 
(Tseng, Kang & Chung, 2014). The study of Chen and Wang (2009) in the life insurance 
industry has confirmed that relationship quality has a significant influence in determining 
customer satisfaction and eventually results in increasing customer loyalty. Tseng et al. 
(2014) used the Adams equity theory to evaluate customer response to loss-premium 
comparisons and insurance coverage to customer acceptance of insurance claim fraud. 
The study found that age and education may influence customer acceptance of insurance 
claim frauds. When policy-holders perceive the volume of premium paid to be less than 
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the insurance claims, they may tend to fraudulent practices. This requires quality 
interactions between the customer and the sales-person or agent to understand the 
principles behind insurance, which is a pool of fund to indemnify losses suffered by any 
policy-holder. 
 
In the study of Tsu-Wei and Feng-Cheng, (2014), to assess the influence of trust in the 
relationship between insurer and sales-person relationship, it was found that the size of an 
insurance company does not have a significant effect on policy-holders, rather the policy-
holder or customer of the insurance company built trust in the sales-person. Policy-
holders and potential customers prefer to build relationships around friends, relatives and 
people closer to them than corporate entities. 
 
A similar study by Rai and Medha (2013) revealed that service quality, customer 
satisfaction, trust, commitment, corporate image, switching cost and communication are 
the variables which determine customer loyalty. Subsequently the study revealed that 
service quality and commitment are the strongest predictors of customer loyalty while 
customer loyalty of public sector insurers is relatively higher than private sector insurers 
in the Indian life insurance industry.  
 
2.7 Core Service Quality 
Core service quality has been described as the outcome of the service delivery (Levesque 
& McDougall, 1996). Similarly, core service has been described as the actual product or 
service offering (Brogowicz, Delene, & Lyth, 1990). This concept can also be described 
as the ability of an organization to focus on quality in their offering to enhance customers‟ 
expectations. In the insurance industry, their core mandate is to sell policies intended to 
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indemnify policy holders should they suffer losses in the future. This requires a thorough 
explanation of insurance policy details to potential customers before signing up for an 
insurance policy. Subsequently, deductions are made as agreed and claims paid as and 
when necessary to affected parties. 
 
In the service industry it have been revealed that mistakes, billing errors and service 
catastrophes are attributes of core service failure which might impact negatively on the 
outcome of service to the customer (Keaveney, 1995).  This means core service quality 
can be described as avoiding mistakes, billing errors and service catastrophes associated 
with service delivery. The ability of the service provider to manage such challenges 
associated with core service delivery requires adequate conflict management techniques.  
 
In service delivery, several elements such as human, machinery and technologies play a 
vital role in providing an effective service to customers. These elements may not always 
be effective due to factors that might not be easily predicted. This assertion has been 
confirmed by Zeithaml and Bitner (2000) to mean that service failure is inevitable even 
for the best firms with world class technology and systems. This means machinery 
breakdowns may occur during service delivery, technological failure or system failure 
may occur as well as human inefficiencies are bound to occur due to different moods and 
feelings of the service provider at different times that can affect core service delivery. The 
management of the occurrence of such service failures by service providers may influence 
customer satisfaction or otherwise. Service providers have to demonstrate prompt and 
effective mechanisms to address such challenges. An effective conflict handling practice 
may boost customer confidence to continue to repurchase a product or service offerings. 
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Existing studies in the service industry confirm a direct and positive relationship between 
conflict handling and customer loyalty (Ndubisi et al., 2007; Narteh, 2013).  
2.8 Tangibles in Service Delivery 
Tangibles in service delivery refer to the physical environment where the actual service 
takes place. The physical environment includes the buildings of the insurance companies, 
the furniture and lay out of the office as well as the ambience of the office. The nature of 
the building and office lay-out is vital in communicating to the public the company‟s 
ability to pay claims when a policy-holder suffers damage. The premises of an insurance 
company which is well built will signify that the company is well resourced while a 
wretched building will signify the company does not have enough resources for their 
operations. The ambience of the company refers to the lighting, sound and painting as 
well as colour of the buildings. The appearance of employees is equally essential in 
service delivery. This may appeal to customers and enrich the service encounter (Jamal & 
Naser, 2002).  
 
2.9 Customer Loyalty  
The concept of customer loyalty is defined by Oliver, (1999) as a deeply held 
commitment to re-buy a preferred brand of product or service consistently in the future, 
not withstanding situational influences and marketing efforts. The extent to which 
customers remain loyal might not necessarily mean there are satisfied. The confirmation 
of this assertion has been demonstrated in a study that explained that focusing only on 
satisfying customers who have the freedom to make choices in this competitive marketing 
environment is not enough to keep them loyal (Jones & Sasser, 1995). The study of the 
insurance industry found that insurance provider gets to recover their selling cost of an 
insurance policy only when the policy is renewed for three to four years (Zeithaml et al., 
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1996). This implies that when customers are satisfied with the services of insurance 
companies, they intend to stay; this enables the company to recover it selling cost through 
the customer remaining loyal. Similarly, the study of the insurance industry revealed that 
maintaining long term relationships with customers will enhance cross-selling and 
positive recommendation intentions (Lombardi, 2005). 
 
Customer loyalty has also been described as combining intentions, attitudes and seller 
performance indicators (Palmatier, Dant, Grewal & Evans, 2006). The interaction of 
attitudinal and behavioural components has become frequently used in academic studies 
in conceptualizing customer loyalty. 
 
Subsequently, most researchers describe loyalty as an attitude-based phenomenon, which 
must be demonstrated by customers through a positive, preferential attitude towards a 
product or service (Reichheld, 1996; Uncles, Dowling, & Hammond, 2003). These 
scholars consider customer loyalty as attitudinal. On the other hand, customer 
commitment usually emerges from a customer‟s consistent favourable set of beliefs that 
relates to the brand being purchased. Inferring from their submission, attitudinal loyalty 
refers to the customer‟s state of mind in relation to beliefs, norms and values held by the 
customer towards a brand. The study of the Greek insurance industry found word-of-
mouth (WOM) to be an antecedent of behavioural loyalty, however, satisfaction did not 
have a direct effect on repurchase intention (Tsoukatos & Rand, 2006). 
 
Other scholars have described customer loyalty from the behavioural perspective (Bowen 
& Shoemaker, 1998; Too, Souchon & Thirkell, 2001; De Wulf et al., 2001). Customer 
loyalty from the behavioural perspective measures a consumer‟s purchasing frequency 
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and amount spent on a brand or service relative to a competing brand. Similarly, 
behavioural loyalty has been described as the volume of purchase, frequency of purchase 
and repeat purchases in the hospitality industry (Bowen & Shoemaker, 1998). 
 
In order for businesses to enjoy the value of customer loyalty, there is a need to 
operationalise loyalty by moderated contingency variables in a customer‟s current 
circumstances such as finance and time pressure as well as purchasing behaviour in the 
relationship between attitude and behaviour purchases by customers (Uncles et al., 2003).  
 
Marketing literature has confirmed the relevance of customer loyalty to the preference for 
a particular products category, service and/or store evidence from their repeated purchase 
of such product or services (Uncles et al., 2003). Subsequently, loyalty has been 
expressed in relation to service encounter that is long term in nature between the customer 
and service provider (Sheth & Parvatiyar, 1995). This development confirms the assertion 
of customer loyalty being an important component of relationship marketing (Palmer, 
1994; Too et al., 2001). Behavioural loyalty has a direct impact to the revenue 
mobilization of businesses since customers will buy and subsequently continue to 
repurchase the services of the business. However, customers who do not encounter quality 
service may be influenced by other competitors and may communicate negatively about 
their experiences to other potential customers. 
 
Attitudinal loyal customers on the other hand, have a great impact on businesses since 
they add strength to existing positive brands through positive word of mouth promotions 
to influence potential customers to patronize such brands. In the context of the insurance 
industry, customer loyalty is described as customers who continue to maintain their policy 
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with the same service provider and are willing to recommend the insurance policies of 
their service provider to other prospective customers.  
 
2.10 Switching Costs (Moderating Variables) 
In the marketing literature switching cost was first introduced by Porter (1980) to mean a 
one-time transactional cost incurred by consumers from a product or service provider to 
an alternative provider. Switching cost refers to a consumer‟s perception of uncertainties 
and adverse consequences of moving to an alternative service provider as opposed to 
remaining with the current service provider (Dowling & Staelin, 1994). The switching 
costs has been referred to as a perceived barrier that can deter customers from moving to 
an alternative supplier, especially when negative experiences occur (Porter, 1998; Sharma 
& Patterson, 2000; Jones, Mothersbaugh & Beatty, 2007). Uncertainties associated with 
switching to an alternative service provider can be described as the perceived cost to the 
customer. Perceived risk refers to consumers‟ uncertainty about losses or gains associated 
with any exchange encounter (Murray & Schlacter, 1990; Murray, 1991). According to 
Jackson (1985), switching costs is the sum total of economic, physical and psychological 
costs. In the life insurance industry, switching cost include termination costs imposed by 
the current service provider to costs of joining another service provider (Chen & Wang, 
2009). 
 
Businesses invest through promotional activities, prospecting for new customers or 
employ price reduction strategies to acquire new customers. This cost associated with 
acquiring new customers can only be recovered through customer repurchase of the 
offerings of the existing supplier‟s products or service. 
  
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Some scholars claim the switching cost refers to the extent to which consumers perceive 
financial cost, time cost, termination cost and psychological cost as barriers to their ability 
to switch from their current service provider and as such, influence a customer‟s decision 
to remain with the existing service provider (Sengupta, Krapfel & Pusateri, 1997; 
Burnham et al., 2003; Chen & Wang, 2009). Switching costs were operationalised as 
procedural switching cost, lost benefits cost and social switching cost (Jones et al., 2007). 
The study of the Spanish insurance market revealed that the  switching costs is composed 
of six dimensions, which include, benefits loss cost; personal relationships loss cost; 
economic risk cost; cost of searching and evaluation; set-up cost and monetary loss cost 
(Barroso & Picón, 2012). The components of the switching costs have been described as 
financial, procedural and relational costs associated from changing a current service 
provider.  
2.10.1 Financial Cost 
Financial cost is any monetary benefit associated with service delivery, which may 
influence a customer from switching from the current service provider. These monetary 
benefits may include discounts, credit facilities and any form of financial incentive 
offered by the service producer to influence customer repurchase. In the Ghanaian life 
insurance industry, the financial cost associated with service delivery may take the form 
of relatively large sum assured policy-holder; assessing some portion of the policy 
periodically; receiving large sum of money after a period of time without suffering any 
losses as well as losing the entire investment should they exit the current service provider. 
 
2.10.2 Procedural Switching Cost 
Procedural cost refers to economic risk, customer evaluation and learning procedures as 
well as set up cost associated with switching from a current service provider to an 
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alternative service provider (Burnham et al., 2003).This may be loss of time, effort and 
termination costs associated with switching a service provider or brand. Time cost is the 
benefit associated with the length of period a customer continues to stay with a service 
provider in relation to switching to an alternative service provider. These benefits may 
include a customer becoming used to the operations of the service provider and the 
relationship that might be created may negatively influence customer intention to switch. 
In the Ghanaian life insurance industry, time cost may be referred to as the waiting period 
for a policy to mature before any benefits are attributed to the policy-holder should they 
suffer any losses.  
 
Similarly, procedural cost has been described as the perceived termination cost associated 
with a customer switching from a current service provider to the joining cost with the 
alternative service provider (Colgate & Lang, 2001). According to Morgan and Hunt 
(1994), termination cost is defined as all expected losses from switching from a current 
service provider, which includes perceived lack of comparable potential alternative 
partners and relationship dissolution expenses. When customers perceive the effect of 
termination cost to be high, it can lead to commitment with the existing service provider 
or brand. Commitment has been described as an enduring desire to maintain a valuable 
relationship (Moorman, Deshpande & Zaltman, 1993). Commitment is one of the 
important variables for assessing customer loyalty and subsequently predicting repurchase 
intention (Morgan & Hunt, 1994; Gundlach, Achrol & Mentzer, 1995; Wilson, 1995). The 
term commitment implies that the service providers must display a higher sense of 
responsibility towards the establishment of a relationship which should satisfy and benefit 
stakeholders (Morgan & Hunt, 1994). Customer contact employees have to demonstrate 
their enduring desire by being prompt and willing to meet the needs and wants of 
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customers. This implies that the customer perception of a high termination cost can 
influence customer commitment and hence they remain loyal. 
 
2.10.3 Relational Switching Cost 
This has been described as psychological cost, which is the customer‟s own assertion of 
evaluating the current service provider in relation to an alternative provider in terms of 
interaction quality. This may include the customer‟s assertion of whether all service 
providers are the same or whether alternative providers may provide even better services. 
Relationship switching cost can also be explained as the emotional discomfort of the 
customer, which results from the relational bond existing with the current service provider 
as opposed to the new service provider which is unknown. The relational switching cost 
plays a significant role in retaining customers of various service providers in different 
service sectors (Colgate, Tong, Lee, & Farley, 2007; Chen & Wang, 2009).   
 
 
 
 
 
 
 
 
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Figure 1: Conceptual Framework 
 
 
 
 
 
  
 
 
 
 
 
 
Source: Author‟s Adaption (McDougall & Levesque, 2000; Chen & Wang, 2009; Narteh 
& Kuada, 2014). 
This framework was adopted to evaluate the relationship between customer satisfaction 
and loyalty in the life insurance industry in Ghana. The antecedents of customer 
satisfaction are core service quality, relationship quality and tangibles associated with 
service delivery. The antecedents becomes the independent variable while customer 
satisfaction is the initial outcome variable. Subsequently, customer satisfaction becomes 
the independent variable while customer loyalty is the second outcome variable. 
Switching costs will moderate the relationship between customer satisfaction and loyalty 
to ascertain its impact on the relationship. This relationship was tested in the life 
insurance industry in Ghana. 
OUTCOME 
VARIABLE 2 
 
OUTCOME 
VARIABLE 1 
VARIABLES                               
PREDICTOR 
VARIABLES 
 
CORE SERVICE 
QUALITY  
 
CUSTOMER 
LOYALTY 
CUSTOMER 
SATISFACTION 
TANGIBLES 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SWITCHING COSTS 
 
RELATIONSHIP 
QUALITY 
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2.11 Core Service Quality and Customer Satisfaction 
In marketing literature, the relevance of core service quality to customer satisfaction has 
been established in different contexts (McDougall & Levesque, 2000; Narteh & Kuada, 
2014).Other scholars have identified the impact of service quality on customer loyalty 
(Parasuraman et al., 1991; Cronin & Taylor, 1992; Hinson et al., 2006). 
 
Core service has been described as the outcome of service delivery (Levesque & 
McDougall, 1996).Satisfaction has been linked to core service quality, which describes 
customer satisfaction as the extent to which actual service delivery equals a customer‟s 
perception of expected performance in an exchange encounter (Oliver, 1996). This 
implies that core service quality has a significant impact on customer satisfaction. 
 
Some scholars have argued that core service failure has a negative impact on customer 
retention in the service industry (Keaveney, 1995). However, some studies identified the 
positive relationship between core service quality and repurchase intention (Brady & 
Cronin, 2001; Gera, 2011). This reveals the relevance of core service quality in relation to 
customer satisfaction in the service industry. 
 
From the above submission, the researcher therefore proposes the following hypothesis: 
H.1: There is a positive relationship between consumer perception of core service quality 
and customer satisfaction in the life insurance industry. 
 
2.12   Relationship Quality and Customer Satisfaction 
Literature on relationship marketing has been described as creating a bond between 
customers and service providers, which is based on mutual exchange and fulfillment of 
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promises (Gronroos, 1994). In relationship quality, the sales-person‟s ability to fulfill his 
or her promises improves relational exchanges.  
 
In a service encounter, the service provider promises the customer a specific outcome, 
while the customer, in return, pays appropriate consideration or amount for the service 
received. The interactive aspect of relationship building is very crucial in understanding 
the customer and explaining exactly the implication of the service or insurance policy the 
customer is going to undertake. This is necessary to ensure customers develop trust for 
their service providers. The customers begin to doubt or lose trust in a service provider if 
they are not able to fulfill their promise to the customer. Trust is therefore the bases for 
building any long lasting relationship and as such, service providers should consider this 
element as vital in their quest to persuade customers to repurchase their products or 
services. In the life insurance industry, trust has been identified as an antecedent to 
customer loyalty and the third most important determinant of customer loyalty (Rai & 
Medha, 2013).  
 
In the marketing literature however, overall customer satisfaction in service delivery has 
been influenced by the relevance of relationship quality (Crosby et al., 1990). Subsequent 
studies have found a direct relationship between the interpersonal relationship and 
customers‟ repurchase intention (Jones, Mothersbaugh & Betty, 2000). Other studies have 
confirmed that relationship quality is a key determinant in customer satisfaction (Gengler 
& Leszczyc, 1997; Hennig-Thurau & Klee, 1997; Chen & Wang, 2009). Subsequently, 
the study by Narteh and Kuada (2014) found relationship quality to strongly influence 
customers‟ overall satisfaction and recommended that future studies explore the 
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constituents of relationship quality dimensions more closely while emphasizing that trust 
is an important attribute in relationships.  
 
From the development, the researcher therefore proposes the following hypothesis: 
H.2: There is a positive relationship between relationship quality and customer 
satisfaction in the Ghanaian life insurance industry. 
 
2.13 Tangibles and Customer Satisfaction 
The relevance of tangibles in service delivery has been established in the banking industry 
to influence customer satisfaction (Narteh & Kuada, 2014). Contrary to the banking 
industry, a study of the Greek insurance industry found tangibles associated with service 
delivery to be insignificant (Tsoukatos & Rand, 2006). This implies that the customers do 
not consider tangibles in assessing satisfaction. Moreover, the physical evidence in 
service delivery may communicate the financial capacity of the insurance company and 
their ability to pay claims as and when they are due to a policy-holder. 
 
From this development, the researcher proposes the following hypothesis: 
H.3: There is a positive relationship between relationship quality and customer 
satisfaction in the Ghanaian life insurance industry. 
2.14 Customer Satisfaction and Loyalty 
The impact of customer loyalty on profitability has been demonstrated in literature where 
the ability of a company to retain a customer by 5% can lead to an increase in profits 
between 25% and 85% depending on the industry type (Reichheld & Sasser, 1990). 
According to Moore and Santomero (1999), high customer retention rates are associated 
with better financial performance. 
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The concept of loyalty has been argued to have a strong relationship to profitability of 
businesses and hence a strategic competitive tool (Reichheld, 1993; Hoffman & Kelley, 
2000).A study of the insurance industry has confirmed customer satisfaction to have a 
direct influence on customer loyalty (Lai, Liu & Lin 2011).  Some studies have confirmed 
that customer satisfaction significantly influences loyalty (Ganesan, 1994; Mittal, Ross & 
Baldasare, 1998; Mittal & Kamakura, 2001).  
 
From this development, the researcher therefore proposes the following hypothesis; 
H.4: There is a positive relationship between customer satisfaction and loyalty in the 
Ghanaian life insurance industry. 
 
2.15 Moderating Effect of Switching Costs 
The construct between customer satisfaction and loyalty has been established in literature, 
however, its relative strength can be influenced by other variables. This study will 
evaluate the impact of switching costs on customer satisfaction and loyalty in the life 
insurance industry. 
 
In a French study of mobile phone services, it was found that the impact of switching 
costs had a direct influence to the volume of purchase frequency and as such, 
strengthened the relationship between customer satisfaction and loyalty, which eventually 
results in customer retention (Lee, Feick & Katz, 2001). This implies that higher 
switching costs will negatively influence customer intention to switch. The study of the 
life insurance industry revealed that switching barriers has a statistically significant 
influence on the relationship between core service quality and customer satisfaction in-
terms of switching costs, relationship investment, attractiveness of alternatives, and 
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service recovery (Chen & Wang, 2009). Another study by Jones and Sasser (1995) has 
revealed the relevance of switching costs as a factor that discourages customers from 
changing their current service provider to another, despite existing competition in the 
industry. 
 
Contrary to the other studies, a customer‟s decision to switch a service provider does not 
necessarily depend on the perception of switching costs and the alternative attractiveness 
(Wieringa & Verhoef, 2007). This assertion implies that customers may still switch 
service provider in-spite of switching barriers developed by the service provider.  
 
The level of customer satisfaction might be relatively low but it can significantly 
influence customer retention when the switching cost is relatively high (Colgate & Lang, 
2001). Other scholars have argued that the higher switching costs are positively related to 
customer loyalty (Gronhaug & Gilly, 1991; Oliva, Oliver, & MacMillan, 1992; 
Bendapudi & Berry 1997; Lee & Neale, 2012; Laksamana, Wong, Kingshott & Muchtar, 
2013). The effect of the switching cost as a moderating factor has been established to 
influence the relationship between satisfaction and loyalty (Jones et al., 2000). The 
moderating role of switching costs has been found to have a negative influence on 
switching intention in the car insurance industry (Anton et al., 2007). The switching costs 
associated with insurance services deters policy-holders from switching providers (Gera, 
2011).A consumer perceived high switching cost can significantly influence unsatisfied 
customers to remain loyal (Gronhaug & Gilly, 1991). Bateson and Hoffman (1999) 
argued that customer satisfaction and switching costs are believed to be the most 
significant predictors of customer repurchase behaviour, which results in loyalty. 
 
 
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From this development, the researcher therefore proposes the following hypothesis: 
H.5: There is a significant effect of the switching costs on the relationship between 
customer satisfaction and loyalty in the Ghanaian life insurance industry.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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CHAPTER THREE 
CONTEXT OF THE STUDY 
3.0 Introduction 
This chapter examines the geographical context of the insurance industry in Ghana. The 
study further examined the industry performance, characteristics and history of the sector. 
The chapter will provide insight into the insurance industry to readers of this document 
and relate the industry to the analysis of the study. Additionally the context of the study 
will provide details of policy framework and government position on the insurance 
industry as well as the contribution of the sector to total gross domestic product of Ghana. 
 
3.1 The Geographic Location and Characteristics of Ghana 
Ghana is a member of the Economic Community of West African States (ECOWAS) 
attained independence over five decades ago. The economy of Ghana continues to grow, 
recording a gross domestic product (GDP) of $47.93 million dollars and a real GDP 
growth of 7.1% while inflation rate was at 11.6% and population of 25.9 million as of the 
end of 2013 (World bank, 2013). The major export commodities referred to as traditional 
exports of Ghana includes cocoa, logs, mineral ore, fresh yam and fish (Ghana Revenue 
Authority, 2014). Ghana, in recent times, has found crude oil in large quantities and this is 
expected to contribute to GDP through exporting oil to the international market (NIC, 
2013). 
3.2 Historical Development of Insurance in Ghana 
The evolution of insurance in Ghana can be traced to the pre-colonial era where the 
insurance industry was dominated by British insurance firms who operated from the 
United Kingdom (Ansah-Adu et al., 2011). The policies and operations of the insurance 
industry were designed to satisfy the insurance needs of the British citizens operating in 
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the colony then known as Gold Coast. The relevance of insurance to foreign nationals 
lead to the establishment of Gold Coast Insurance Company in 1955 before Ghana 
attained independence on 6th March, 1957. The core business was to sell life insurance 
policies only (NIC report, 2011). 
 
In order to facilitate trading activities after independence, the Ghana Insurance Company 
was established to provide insurance products for individuals and the business 
community. In 1960, the operation of the Ghana Insurance Company was diversified. The 
Ghana General Insurance Company was established to provide fire and motor insurance 
products in Ghana. The government of Ghana established the State Insurance Company 
(SIC) in 1962. This was done through an executive instrument by merging the Ghana 
Insurance Company and Ghana General Insurance Company (NIC, 2011). This 
development was to enable the government to gain control of the insurance company and 
further provide needed legislation to grow the industry. Meanwhile, the SIC, was the sole 
insurance company legally mandated to provide insurance services for government 
businesses and the private sector. In order to be efficient in the delivery of insurance 
services to serve both domestic and international markets, the Ghana Reinsurance 
Company (Ghana-Re) was established in 1972 as a subsidiary of SIC (Ghana 
Reinsurance, 2014). The establishment of Ghana-Re was to facilitate the insurance issues 
with regards to imports and international businesses. The efficient operation by Ghana-Re 
was recognized by the government and this lead to the company gaining autonomy in 
1984. This resulted in Ghana-Re operating separately without any interference from SIC. 
Subsequently, the company was incorporated as a limited liability company in 1995.  
 
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The International Association of Insurance Supervisors (IAIS) law of 2006 was 
operationalised to enhance insurance operations across several countries. The objective of 
this regulatory body is to promote effective and globally consistent supervision of the 
insurance industry in order to develop and maintain fair, safe and stable insurance markets 
for the benefit and protection of policy-holders, while contributing to global financial 
stability. According to IAIS, insurance industry players should operate freely with their 
competitors.  
 
3.3 Profile of Insurance Companies used in the Study 
The researcher used seven insurance companies for this study. Each of these companies 
agreed to the researcher administering questionnaires to its policy-holder through selected 
branches which had relatively more patronage. 
 
3.3.1 Vanguard Life Assurance Company Limited 
The corporate entity Vanguard Life Assurance Company Limited is a separate legal entity 
registered and licensed by the National Insurance Commission (NIC) to handle life 
insurance products in Ghana. The re-registration and concentration on the provision of 
only life insurance policies was in line with the requirements of the new insurance law 
Act 724. 
 
Earlier Vanguard Assurance offered both life and non-life insurance policies to the 
general public and have been ranked among the top three insurance companies in Ghana 
for several years. Vanguard life insurance has been in operation within the last decade, 
however, the company has enjoyed a good reputation from over thirty-nine years of 
operating both life and non-life insurance policies in Ghana. Their current product range 
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includes welfare and retirement plans as well as investment packages (Vanguard 
Assurance, 2015). 
 
3.3.2 Gemini Life Insurance Company Limited (GLICO) 
The company commenced its operations in Ghana in 1987 by providing policies to 
improve the livelihood of Ghanaians. The success of their operations is evidence from 
their remarkable business performance record and a nationwide branch network. The 
company‟s growing financial strength and assets portfolio ensure prompt payment of 
claims and fulfillment of its social responsibility particularly in the area of sport and 
games. The commitment of GLICO to serve its customer better and contribute to the 
development of Ghana leads to the philosophy “GLICO We cushion you for life” (GLICO 
Life Insurance, 2015). 
 
3.3.3 Enterprise Life Assurance Company Limited 
The corporate entity, Enterprise Life Assurance Company Limited (ELAC) was 
incorporated in the year 2000. The operations of the insurance company was based on the  
initial shareholdings of Enterprise Insurance Company, (a listed general insurance 
company in Ghana), African Life (now Sanlam Sky a South African life insurance 
company) and the International Finance Corporation, (the commercial wing of the World 
Bank). 
The company is currently being controlled by the shareholding of Enterprise Group 
Limited and Sanlam. ELAC operates as a specialist life insurance company providing 
affordable and innovative products, designed to meet the needs of its policy-holders. 
 
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Table 1: ELAC Products (Life Policies) 
 
Nos Individual Life Products Group Life Products 
1 Funeral Finance Plan Group Funeral Plan 
2 Lifetime Needs Plan Group Corporate Life Plan 
3 Educare Plan Church Funeral Scheme 
4 Family Income Protection Plan  Voluntary Funeral Scheme 
5 Life Time Needs Plan Credit Life 
Source: Enterprise life, 2015 
 
3.3.4 StarLife Assurance Company Limited 
StarLife Assurance Company Limited was incorporated in October, 2005 as a limited 
liability company in compliance with the new Insurance Law 2006, Act 724. This means 
their operations were separated to provide either life or general insurance.  
StarLife Assurance Company provides a wide range of life policies to meet the           
demands of the general public. The success of their operations in satisfying their policy-
holder has been recognized, as they are rated among the top three insurance companies in 
Ghana (StarLife, 2015). 
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 Table 2: Starlife Products (Life Insurance Policies) 
Nos Corporate Products Individual Products Specialized Products 
1 StarLife Employment 
Security Plan 
Star Child Lifeline 
Plus 
Bancassurance 
2 StarLife Keyman 
Plan 
StarLife CashBuilder 
Plus 
GroupWealfare Scheme 
3 StarLife Loan 
Protection Plan 
StarLife Esteem 
Homecall Plan 
 
4 StarLife Mortgage 
Protection Plan 
StarLife Family 
Protection Policy 
 
5  StarLife Wealthmaster 
Plus 
 
Source: StarLife, 2015 
 
3.3.5 Provident Life Assurance Company Limited 
The corporate entity was registered by the Registrar-General‟s Department in February 
2006, under the Company‟s Code, 1963 (Act 179), numbered as CA-23, 538.  
Provident Life Assurance offers life assurance policies both in Ghana and abroad. The 
company provides quality and efficient service in the industry, while offering innovative 
life assurance products. Their product range includes; 
 
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Table 3: Provident Life Products & Services 
 
No. Products (Policies)  
1 Keyman Policy 6. International Travel Insurance 
2 Provident Education Plan 7. Life Annuity 
3 Credit Life Assurance 8. 50 plus Security Plan 
4 Funeral Expense Policy 9. End of Service Benefit Plan 
5 Personal Accident Policy 10. Mortgage Protection Plan 
 
   Source: Provident, 2015 
 
3.3.6 Metropolitan Life Insurance Ghana Limited 
The company was formed as a joint venture between Metropolitan Insurance Company 
Limited of Ghana and Metropolitan Holdings Pty of South Africa. Metropolitan Life 
was licensed by the National Insurance Commission and commenced its operations in 
Ghana on 23rd February, 2006. The company‟s strength relates to its size, scale and scope, 
propelled globally by a brand which has been in the business of financial solutions for 
over 117 years and endorsed by over 10 million clients across the world. Metropolitan 
Life Insurance Ghana is a member of the Metropolitan Group of companies in Ghana, 
comprising Metropolitan Pensions Trust Ghana and Metropolitan Health Insurance 
Ghana. The company offers competitive and innovative products such as School Finance 
Plan, Eternity Plan and Finance Provider Plus (Metropolitan Life, 2015). 
 
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3.3.7 SIC-Life Company Limited 
The historical background of SIC-Life Company Limited can be traced to the reputable 
multi-line insurer, State Insurance Company of Ghana Limited (SIC).SIC has been in 
operation since 1962 operating life insurance policies. The company was registered as a 
public corporation. In 1995 the company was converted into a public limited liability 
company as part of the Government of Ghana‟s initiative to divest part of its shareholding 
in all state corporations. 
  
Developments in the insurance industry require compliance with the Insurance Law 2006, 
Act 724 leading to the creation of SIC-Life company limited (SIC-Life) in 
2007.Currently, SIC-Life is the largest and most reputable insurance company in Ghana 
controlling the largest share of the insurance market for both life and non-life insurance 
business lines. The company is the leader in the life insurance industry. This is evidence 
from their operations as well as key performance indicators such as capital base, 
shareholders‟ fund, total assets, profitability and market share. 
 
The company has a solid financial base, coupled with highly motivated and experienced 
human resources. The company enjoys a favorable image within the life insurance 
industry both locally and internationally and equally has a wide network of area and 
branch offices throughout the country. SIC-Life has a large agency force whose focus is 
to respond professionally to the varying needs of the insuring public. 
 
  
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Table 4: SIC-Life Policies  
Nos Life Policies  
1 Family Security Plan                     8. Loan Protector Plan 
2 Flexi-Child Educare Plan 9. Key-Man Assurance 
3 Education Plan 10. Mortgage Protection Plan 
4 Ultimate Life Plan 11. Group Life (Team Assurance) 
Policy 
5 Group Life Endowment Policy 12. Guaranteed Endowment Plan 
6 Final Journey Plan 13. Sika Plan (OKUM-KA) 
7 School Fees Protection Plan  
  Source: SIC-Life, 2015 
 
3.4 Life Endowment Policy (Full Risk Policy) 
An endowment policy is an investment product that one can purchase from a life 
assurance company. The policies are long term investments, which involve the policy- 
holder making regular premium payments to the insurance company and after a set period 
the company pays out the lump sum assured. The policy benefits both the life assured and 
the family of the assured depending on the occurrence of any life losses. The policy 
makes provision for the family of the life assured in the event of his early death, or else 
the life assured benefits from a lump sum assured at a desired age.  
 
3.5 Risk plus Investment 
Investment financial plans are usually operated by the banking sector. However, the 
insurance companies have adapted innovative means to design investment products 
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embedded with insurance policies to serve the short term needs of policy-holders as well 
as prospective investors. These products were developed to meet the needs of the 
customer and prospective customer who intend to invest and benefit from insurance at the 
same time. 
 
3.6 Function of National Insurance Commission 
The National Insurance Commission is mandated to oversee the operations of all 
insurance companies in Ghana (NIC, 2011). In order to carry out its duties the 
Commission carries out the following functions in accordance with;   
1. Licenses insurers and insurance intermediaries who transact insurance business in 
Ghana; 
2. In consultation with relevant bodies it approves and sets standards for the conduct of 
insurance business and insurance intermediary business; 
3.  Encourages the development of and compliance with, the insurance industry's codes of 
conduct; 
4.  Approves, where appropriate, the rate of insurance premiums and commissions in 
respect to any class of insurance; 
5. Provides a bureau to which complaints may be submitted by members of the public for 
resolution; 
6. Arbitrates insurance claims referred to it by any party to an insurance contract; 
7. Recommends to the Minister of Finance proposals for the formulation of policies for 
the promotion of a sound and efficient insurance market in the country; 
8. Supervises and approves transactions between insurers and their reinsurers; 
9. Undertakes sustained and methodical public education on insurance; 
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10. Takes action against any person carrying on an insurance business or the business 
of insurance intermediaries without a license; 
11.  Maintains contact and develops relations with foreign insurance regulators and 
international associations of insurance supervisors and maintains a general review of 
internationally accepted standards for the supervision of insurers and insurance 
intermediaries; 
12. Supervises, regulates and controls compliance with the provisions of this Act (2006) 
and Regulations made under it and any other enactment relating to insurance; and  
13. Performs other functions that are incidental to the carrying out of its functions under 
this Act (2006). 
 
3.7 Players in the Life Insurance Industry 
The insurance industry in Ghana continues to grow. The insurance industry players 
constituted 25 non-life companies, 18 life insurance companies, 2 reinsurers companies 
and 60 brokers as at the year ending 2013 (NIC, 2013). The continuous growth of the 
insurance industry presents a competitive environment and highlights the necessity to be 
efficient in order to satisfy the needs of policy-holders.  
 
Non-life insurance policies include motor car, general products and properties such as 
buildings, businesses and machinery, while the life insurance policies are intended to 
promote the personal welfare of individuals who chooses any of the policies.  
 
This study focuses on the life insurance industry, specifically the full risk policies and risk 
plus investment policies in Ghana. 
 
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3.7.1 Insurance Brokers 
Insurance brokers are professional in insurance and risk management who act on behalf of 
their clients and provide advice in their interest. In Ghana their operations are regulated 
by the Ghana Insurance Brokers Association (GIBA). 
According to the NIC, the top 10 performing brokerage firms in the year 2013 were; 
1. KEK Insurance Brokers Limited 
2. Edward Mensah, Wood & Associates Limited 
3. Gras Savoye (Gh.) Limited 
4. Tri-Star Insurance Services Limited 
5. Horizontal Insurance Brokers Limited 
6. Safety Insurance Services Brokers Limited 
7. KEK Reinsurance (Africa) Limited 
8. Crown Insurance Brokers Limited  
9. Shield Insurance Brokers Limited 
10. Midas Insurance Brokers Limited 
 
3.7.2 Insurance Agents 
Service delivery in the insurance industry is characterized with the use of agents to reach 
a wider population, promote the policy and to manage the activities of policy-holders. 
Currently the industry has over 4,523 licensed tied agents across Ghana who represents 
the interest of all the insurance companies in Ghana (NIC, 2013). In addition to the 
individual agents, insurance companies are merging some of their operations with some 
banks and micro financial institutions to further promote the insurance product to 
customer. The corporate agents constitute 10 banks and 3 micro financial institutions as of 
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the end of 2011(NIC, 2011). This implies that the insurance industry agents constitute 
individuals and corporate bodies who assist the operations of the insurance companies to 
promote their services at a fee. 
The following financial institutions were licensed by the NIC to operate as intermediaries 
under the banc-assurance partnership arrangement as of the end of 2011. 
1. Bayport Financial Services Limited - Enterprise Life Assurance Co. Ltd. 
2. Consumer Finance Company Limited - Enterprise Life Assurance Co. Ltd. 
3. Agricultural Development Bank Limited - Vanguard Life Assurance Co. Ltd 
 
Subsequently the two banc-assurance partnerships were approved as of the year ending 
(NIC, 2013).  
1. Ghana Commercial Bank Limited – Starlife Assurance Company Limited 
2. Agricultural Development Bank Limited – Vanguard Assurance Company 
Limited 
3.8 Regulation to Operate a Single Insurance Policy 
The Ghanaian insurance industry is regulated by the Insurance Act, 2006.This Act 
however, complies with the provisions of international association of insurance 
supervisors (IAIS). The IAIS was established in 1994 as an insurance regulator of 
insurance industries across the world. The regulatory body is a supervisor of more than 
200 jurisdictions in nearly 140 countries, constituting 97 percent of the world‟s insurance 
premiums (IAIS, 2011).  
According to the Act, all insurance companies were to diversify their operation to either 
Life Insurance or General Insurance but not to operate both policies as a single unit. The 
policy compliance has seen companies separating their operations. The scope of the study 
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is limited to the life insurance industry which is made up of eighteen companies as listed 
below; 
 
Table 5: Life Insurance Companies in Ghana 
 
No. Company Gross Premium Gh¢ (2013) 
1 Capital Express Assurance (Gh) Limited 809,346 
2 Colina Life Insurance Company Limited 906,352 
3 Donewell Life Insurance Company Limited 8,118,905 
4 Enterprise Life Assurance Company Limited 123,846,285 
5 Express Life Insurance Company Limited 5,378,355 
6 Ghana Life Insurance Company Limited  10,533,661 
7 Ghana Union Assurance Company Limited 4,724,564 
8 Glico Life Insurance Company Limited 55,546,000 
9 IGI Life Insurance Company Limited E A 
10 Metropolitan Life Insurance Ghana Limited 21,574,030 
11 Phoenix Life Insurance Company Limited 7,121,098 
12 Provident Life Assurance Company Limited 15,458,278 
13 Quality Life Assurance Company Limited 7,021,932 
14 SIC Life Insurance Company Limited 127,244,626 
15 Starlife Assurance Company Limited 53,428,493 
16 Unique Life Assurance Company Limited 3,798,298 
17 UT Life Insurance Company Limited 11,952,035 
18 Vanguard Life Assurance Company Limited 12,122,417 
TOTALS  469,634,675 
Source: NIC, 2013                                              NB: Enforcement Action by company 
 
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The legislation provided avenue for Ghanaians to be actively engaged in the ownership 
and operation of insurance in Ghana. This compelled all insurance companies operating in 
the country to be incorporated in Ghana with at least 40 percent of their investment being 
owned by a Ghanaian. This policy has totally reduced the dominance of foreigners‟ 
control of the Ghanaian insurance industry. 
 
3.9 Developments in the Insurance Industry 
The insurance industry in Ghana continues to improve service delivery. This has led to 
some developments in the sector and these have been explained below; 
 
3.9.1 Agricultural Insurance 
The Ghana Agricultural Insurance Program (GAIP) is dedicated to the provision of 
insurance to the agricultural sector of Ghana. The program is provided by a pool of 
seventeen Ghanaian Insurance Companies and two Ghanaian Reinsurance companies 
(NIC, 2013). Their operations commenced in May, 2011.The Ghana Insurers Association 
has a technical management unit, which is responsible for the underwriting of this 
business on its behalf. The program started it policy on maize production but has put in 
place measures to extend the coverage to other crops such as rubber and cocoa and 
livestock in general. The development of agricultural insurance products for farmers is a 
landmark for the country that has been approved and supported by the National Insurance 
Commission to promote agriculture. 
 
The Ghana Agriculture Insurance Company (GAIP) currently has three insurance 
products on the market intended to mitigate losses associated with farming in Ghana. The 
Weather Index Insurance is available for small scale farmers with a farm size of less than 
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twenty hectares. This insurance cover will aid farms during drought since adequate 
provisions will be made by the insurance company to reduce losses should such events 
occurs. Additionally the Poultry Policy Insurance is available for farmers who are into the 
production of all kinds of poultry birds. This policy protects birds against accidental 
mortality. The farmer who opt for this policy will be indemnified should this event 
occurs. However, the events leading to the accidental mortality is clearly stated in the 
policy. The means the occurrence of any accidental losses specified under this policy will 
be borne by the insurer or insurance company. The policy covers losses to stock during 
the rearing period; egg laying period and broilers but does not include their waiting 
period. The Multiple Peril Crop Insurance (MPCI) is another agricultural insurance 
package for commercial farmers whose farm size is more than twenty hectares. This 
policy covers farmer‟s crops from natural or climate causes as well as any infections that 
can affect the yield of agricultural products or livestock.  
 
3.9.2 The Draft Insurance Bill 
The provision of insurance services is guided by the International Association of 
Insurance Supervisors (IAIS). The mission of the IAIS is to promote and supervise the 
operations of insurance industries around the world. This is required to develop and 
maintain fair, safe and stable insurance markets for the benefit and operation of policy-
holders and contributes to global financial stability. The IAIS was established in 1994. 
 
In Ghana the NIC oversees the operations of insurance companies through compliance 
with the Insurance Act 2006. The provisions of the Act should be consistent with that of 
the IAIS. The IAIS in 2011 revised its provisions to improve service delivery in the 
insurance industry. This has led to the NIC‟s continuous effort to upgrade the current Act 
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to include current provisions of the IAIS. The Insurance Commission of Ghana has 
therefore prepared a draft bill to government through the Ministry of Finance and 
Economic Planning. The passage of the draft bill will confirm legal compliance to the 
IAIS and further improve the provisions of insurance delivery in Ghana.   
 
3.10 Insurance Products in Ghana 
There is vast potential for growth in the insurance industry of Ghana. This has led to 
companies within the industry to continuously introduce innovative insurance products to 
influence consumers to patronizing any of their services intended to restore then to their 
current status should any eventualities occur. The life policies set out in Table 6 below 
were approved by the NIC; 
Table 6: Products Approvals  
 
Source: NIC, 2013 
 
    No Company Product Category 
1 Colina Life Ghana Limited Funeral Plan Express Life 
2 Enterprise Life Insurance 
Company Limited 
Educare Plan for Standard 
Chartered Bank Ltd. 
Life 
3 Express Life Insurance Company 
Limited 
1.Tigo Hospitalization 
Support Plan 
2. Credit Life Plan 
3.Tigo Family Care Plan 
Life 
 
 
4 Ghana Union Assurance Company 
Limited 
Gyaesu Plan Life 
5 Quality Life Assurance Company 
Limited 
Smart Plan Life 
6 Starlife Assurance Company 
Limited 
Abusua Nkyemfa Life 
7 Unique Life Assurance Company 
Limited 
Schooling Plan Life 
8 Metropolitan Life Insurance Ghana 
Limited 
Barclays Embedded Travel 
Ins. Master Policy 
Life 
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These are some insurance products on the Ghanaian market, however new products are    
being developed year after year and are being approved by the NIC to suit the taste and 
preference of consumers. 
3.11 Customer Challenges 
Customers in the insurance sector continue to faces some challenges from their providers. 
The NIC, as the regulatory body, has set up a complaints unit intended to receive 
customer complaints and possibly assist in resolving such issues. The complaints 
however, have continued in a similar trend as previous years. Most of the complaints 
received were related to motor claims and includes; delay in settlement of claims; dispute 
over quantum; delay in payment of settled claims; and repudation of claims 
 
Complaints related to life policy-holders were as follows; benefits promised by insurers 
differ from benefits on policy documents; insurance company‟s failure to cease 
deductions after the policy had been surrendered; payments of low surrender values;  
delay in processing matured policies for payment; delay in returning refund of wrongful 
deductions; unauthorized premium deductions; and failure of insurance companies to 
resubmit policy documents. 
 
The Commission received a total of 312 complaints from the general public as of the end 
of 2013 (NIC, 2013). Some of these service delivery challenges might influence the future 
repurchase intention of policy-holders, which requires providers to improve upon their 
service delivery. 
 
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These developments, therefore, make the choice of the insurance industry, which forms 
part of the financial sector of Ghana, worth investigating to determine the influence of 
customer satisfaction and loyalty in relation to the switching costs.  
 
3.12 Contribution of the Insurance Industry to the Economy of Ghana 
Insurance penetration in Ghana is relatively slow. The insurance penetration has been 
related to the contribution of total insurance premium to Gross Domestic Product (GDP) 
which is still less than 2 percent of Ghana‟s GDP (NIC, 2013). However, insurance has 
contributed much more to the development of other countries such as South Africa (14.8 
percent), Namibia (7.3 percent), Kenya (2.8 percent), Kenya (2.8 percent) and Malaysia 
(4.8 percent). The exception is Nigeria whose penetration rate is 0.6 percent of gross 
domestic product (Swiss Re Sigma Report, 2011). 
 
The average growth rate in the industry for both life and non-life insurance gross 
premium fell sharply from 35.3% to 23.6% between 2012 and 2013. In real terms total 
gross premium collection for life and non-life grew from 850.7 million to 1,052.1 billion 
from 2012 to 2013 (NIC, 2013) 
 
The total gross premium of Gh¢1, 0521.1 billion consists of Gh¢469.6 million for life and 
Gh¢582.4 million for non-life insurance. The performance indicators of the two major 
policies direction sector are promising. The non-life insurance premium has increased 
from GH¢142 million in 2007 to GH¢582.4 million as of the end of 2011. Similarly, the 
life insurance premium also increased from GH¢187.3 million in 2010 to Gh¢469.6 
million by the end of 2011 (NIC, 2013).  
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Moreover, Ghana in recent times has found crude oil in large quantities. The government, 
through policy, has directed all companies operating within the oil and gas industry to 
take out an insurance policy for all their commercial buildings. This directive is expected 
to further increase insurance premium collection and will add to the total gross domestic 
product of the country.  
 
Further examination by the Government of Ghana on the financial sector through a survey 
revealed that only 5% of the population has an insurance policy (NIC, 2011). However 
the national insurance scheme seen to enjoy lots of patronage due to it cost benefit 
analysis to citizens of Ghana and policy-holders. 
 
In effect the insurance industry contributes moderately to Ghana‟s GDP, however there 
exists a vast potential for industry players to increase their customer base and premium 
collection in order to significantly contribute to the development of Ghana. 
 
 
 
 
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CHAPTER FOUR 
RESEARCH METHODOLOGY 
4.0 Introduction 
This chapter explains the processes and research techniques used in analysing the data for 
the study. These techniques used provided details as to how the research questions were to 
be answered, with the research questions being deduced from the research objectives. The 
methodology for the study was therefore systematic and rigorous in order to draw the 
conclusions that are reliable and objective to the life insurance industry of Ghana.  
 
The chapter explained the data collection processes, the instruments used in collecting 
data as well as how the data was analysed. The research complied with all ethical 
concerns by explaining to all stakeholders what the study entailed and the intended use of 
the data. The compliance with ethical concerns protects the rights of respondents who 
provide data for the study. 
 
4.1 Purpose for Conducting Research 
Research is a systematic approach to investigating a phenomenon. The purposes for 
conducting research have been described as exploratory, descriptive and explanatory 
(Robson, 2002). Exploratory research is most appropriate when a phenomenon needs to 
be explored by examining one or more cases within a bounded system (Creswell, 2007). 
The exploratory studies have been widely described as qualitative research. The conduct 
of such studies seeks to provide insight and not to measure (Hinson, Boateng & Madichie, 
2010). The exploratory studies are usually conducted within a bounded system that 
provides insight into an issue being investigated. This approach to research has been 
described as the interpretive approach to conducting research (Fisher, 2010). The 
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qualitative methodology shares its philosophical foundation with the interpretive 
paradigm, which supports the view that there are many truths and multiple realities. The 
qualitative approach usually collects data by interviewing respondents. Moreover, they 
equally administer open-ended questionnaires to solicit the views and feeling of 
respondents to an issue under investigation. The analysis of such data requires creativity 
and compliance with scientific processes to convince the scientific community of the 
credibility of the finding and the extent to which bias has been eliminated from the study. 
The sample sizes used in such studies are relatively small. Exploratory research is useful 
when the researcher does not know the variables to examine. The researcher may adopt 
this approach because the topic is new, the topic has never been addressed with a certain 
sample or group of people and existing theories do not apply with the particular sample or 
group under study (Morse, 1991). 
 
Descriptive research seeks to measure a phenomenon under investigation and mostly 
relies on numerical data in its analysis. This type of research provides accurate statistics 
of people, events or situations, which serves as a basis for decision making. Subsequently, 
descriptive research has been described as a study that provides a clear statistical 
illustration about a phenomenon, which has already occurred (Robson, 2002). 
 
The explanatory research provides an understanding into specific issues being 
investigated. This type of study seeks to collect data relating to how or why a specific 
situation has occurred. The approach has been considered as practical in nature since it 
seeks to understand the problem being investigated. In effect, explanatory research seeks 
to find the causal relationships between variables (Saunders, Lewis & Thornhill, 2007). 
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This study will apply both descriptive and explanatory approach to evaluate the 
relationship between customer satisfaction and loyalty in relation to switching costs. The 
descriptive aspect will provide information relating to the gender, educational level of 
respondents, number of years on the policy as well as the form of policy, which can be 
full risk or risk plus investment. The explanatory approach, on the other hand, measures 
the causal relationships between core service quality, relationship quality, tangibles and 
customer satisfaction to loyalty by moderation switching costs in the later variables. 
 
4.2 Research Approach 
In literature, the approach to conducting scientific research has been described as either 
quantitative or qualitative or both. The researchers choice of research approach should be 
based on the research problem, purpose and questions that need to be answered. This 
approach to conducting research has been described as inductive and deductive (Saunders 
et al., 2007). The approach to a study informs the methodology. The deductive approach 
can been described as the quantitative method of conducting research. 
 
The deductive approach relies on an established theory to develop a framework. This 
framework is then tested to find answers to the relationship among the variables to 
confirm or reject the assertion. Quantitative research has been described as a research 
method that systematically finds answers to questions by collecting numerical data to 
explain the phenomena using mathematically based methods (Aliaga & Gunderson, 
2000). The world wide view of the quantitative approach is described as the positivist 
approach to research (Fisher, 2010). This approach uses a large sample size or number of 
respondents relative to the qualitative approach of research. The application of 
mathematical tools and techniques makes the outcomes of such studies more reliable 
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since the positivist philosophy argues that there is one objective reality in research. The 
data collection tool, mostly used is the closed-ended questionnaires where the respondents 
are asked to tick the appropriate answer from a multiple choice provided. The findings 
from such studies are more credible since statistical tools are used in the analysis. In such 
studies, biases are reduced due to the distance between the researcher and the research. 
 
The inductive approach to research usually begins by observing a phenomenon and 
developing a pattern for the occurrence of such an event. This approach to research relies 
on observation to solve a specific issue in the society. The inductive approach has been 
described as qualitative research which aims at exploring a social phenomenon. This 
occurs by collecting data from the participants, by setting and developing themes through 
observation to provide meaningful explanations intended to address the phenomenon 
under investigation (Creswell, 2007). 
 
This study adopted the deductive approach since the relationships to be examined have 
been confirmed by literature. Consistent with studies on customer loyalty and/or 
switching in the insurance industry, the survey method was used (Colgate & Lang, 2001; 
Chen & Hitt, 2002; Tsoukatos & Rand, 2006; Chen & Wang, 2009; Gera, 2011).  
 
The study used the survey method in order to achieve its objectives of measuring the 
relationships of established variables derived from an extensive review of existing 
literature.  
 
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4.3 Research Design and Strategy 
The study developed a framework to assess the antecedents of customer satisfaction and 
its outcome on service delivery in the life insurance industry. The framework provides the 
basis for measuring the relationships between the variables under consideration. The 
essence of research design is to structure the research to answer research problems clearly 
and accurately to solve an issue (McGivern, 2006).  
 
The convenience sampling technique was used to reach policy-holders of seven insurance 
companies who agreed to the researcher using their premises to reach out to their 
customers within selected branches of the life insurance companies. The data collection 
was limited to policy-holders within the Greater Accra Region. The study administered 
fixed choice questionnaires to policy-holders. In analyzing the data, the researcher used 
the descriptive technique as well as correlation and regression techniques. The findings of 
the study will aid the researcher to make appropriate recommendations to the Ghanaian 
life insurance industry. 
 
4.4 Sampling and Sample Technique 
Sampling is referred to as the process of selecting samples with similar characteristics, 
values and behaviour from a population to collect information relating to a phenomenon 
under investigation. There are two broad categories of sampling, which includes 
probability and non-probability sampling. With the non-probability sampling technique 
members of the population do not have an equal chance of being selected. Moreover, 
probability sampling provides equal opportunity for all members to be selected. The 
probability technique sampling is more realistic for studies that are intended to be 
generalized since it provides a fair response of the population.  
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This study, however, used the non-probability sampling technique in administering 
questionnaires to its target sample as a result of the inability of the insurance companies to 
provide the researcher with its customer base. The population of the life insurance 
industry consists of all policy-holders in Ghana. This sector of the insurance industry is 
made up of 18 registered life insurance companies (NIC, 2013). The researcher sought the 
concern of insurance companies by submitting letters to industry players. The companies 
who agreed to the researcher‟s request were used for the study and these include; the SIC- 
Life, Enterprise Life, Glico Life, Starlife Assurance, Provident Life, Metropolitan Life 
and Vanguard Life Assurance. The study was limited to the Greater Accra Region of 
Ghana and therefore adopting any of the probability sampling techniques was not 
appropriate.  
 
Existing literature confirms the appropriateness of convenience sampling in the service 
industry (Chen & Wang, 2009; Narteh, 2013; Levy, 2014). The study adopted the 
convenience sampling technique in administering questionnaires to policy-holders within 
the seven insurance companies. This helped the researcher to collect relevant data from 
policy-holders for the analysis. 
 
The samples size chosen for this study was based on evidence from published articles on 
relationship marketing, customer satisfaction and/or loyalty in the service industry. In the 
study of the insurance industry by Chen and Wang, (2009), 160 responses were valid and 
used in their analysis. Similar studies in the insurance industry confirmed, 258 responses 
was accepted (Gera, 2011), while 247 questionnaires were properly completed and used 
in another study (Anton et al., 2007). Furthermore, in the study by Tseng et al. (2014) 
they also administered 350 questionnaires of which 208 were returned while assessing 
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insurance claim fraud. Most of these studies adopted the mail survey and had a very low 
rate of completed questionnaires. 
 
The evidence from the above studies has provided the researcher with insight into the 
appropriateness of the sample size chosen for this study. The study therefore administered 
420 questionnaires manually to life insurance policy-holders of the seven companies 
within the sector. Moreover, the analysis of Hair, William, Barry, Rolph & Ronald, 
(2006) indicated that a sample size of 100 and above is ideal in a survey for which 
findings can be generalized. 
 
4.5 Data Collection Methods 
In conducting research, there are two major sources of data collection, namely, primary 
and secondary sources. Primary data are raw facts collected for a specific purpose, while 
secondary data are processed that are intended for other purposes. This study relies 
mainly on primary data, which was collected through the administration of questionnaires 
to get direct responses from the sample chosen. In order to develop the questionnaire for 
the study a detailed review of literature was conducted by the researcher to identify 
relevant measuring items to test the antecedents of customer satisfaction and its outcome 
in the life insurance industry. Measuring scales of the previous studies were modified 
where appropriate to fit the context of this study. The quantitative approach was adopted 
and close-ended questionnaires were administered to derive core information about what 
makes customers loyal. Responses from policy-holders were obtained using a 5 point 
Likert-type scale with anchors of 1 to indicate strongly disagree and 5 to indicate strongly 
agree.  
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Core service quality was measured with four items, which were adapted from previous 
studies (Jamal & Naser, 2002; Al-Eisa & Alhemoud, 2009).Relationship quality was 
measured with two dimensions; trust of the sales-person and satisfaction with the sales-
person. The study adapted twelve items for satisfaction with the sales-person and trust 
(Crosby et al., 1990). In relation to the tangible dimensions of service delivery, four items 
were adapted from literature (Parasuraman, Zeithaml & Berry, 1994). Subsequently, 
overall customer satisfaction was measured with five items from previous studies 
(Verhoef et al., 2002); while loyalty was equally measured with five items and was 
adapted from literature (Zeithaml et al., 1996). Finally, the switching costs were assessed 
under three sub-dimensions, namely, finance, and procedural and relational cost. This 
switching cost‟s constructs where adapted from existing literature (Burnham et al., 2003).  
 
The questionnaire was administered personally throughout March and April, 2015. This 
strategy was necessary since existing literature on customer satisfaction and/or loyalty 
conducted in most services industries administered questionnaires by mail and the 
response rate were relatively low (Anton et al., 2007; Chen & Wang, 2009; Gera, 2011). 
The questionnaires were administered personally through selected offices of the seven life 
insurance companies. The researcher chose two branches of each of the seven life 
insurance companies and administered thirty questionnaires on average per branch. This 
provided a platform to reach existing policy-holders to respond to the questionnaires. The 
process was not without challenges since some policy-holders had to reject the 
questionnaires due to lack of time on their part. On average, a respondent spent 30 
minutes per questionnaire. 
 
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The study equally relied on existing literature, reports on the insurance industry and other 
relevant documents to support its arguments. These documents includes journal articles, 
National Insurance Commission Reports, international association reports on insurance, 
news paper publications, previous studies on the subject and government policies or 
reports on insurance in Ghana. 
 
4.6 Pre-testing the Questionnaire 
The technique of pre-testing the questionnaire is a means of assessing the clarity of the 
questions to be administered to the entire sample size. This was done with 15 policy-
holders of life insurance of which 5 constituted insurance workers who are also policy- 
holders to possibility identify ambiguous questions and some difficulties that might be 
associated with respondents‟ understanding of the issues at stake. The other 10 
respondents constituted policy-holders. Through this processes some corrections were 
made to the questionnaires in order to reduce ambiguity associated with some questions. 
Furthermore, the pre-testing stage gives the researcher the opportunity to test the viability 
of the measuring scale to confirm if those items will eventually give the desired responses 
after the actual data collection processes is completed. 
 
4.7 Analysis of the Data 
The assessment of reliability of the measuring items intended to be tested for the use of 
the questionnaire was done through the use of Cronbach‟s alpha „α‟. Cronbach‟s alpha 
provides an estimate of the internal consistency of items to be used in a study (Hair, 
Black, Babin & Anderson, 2010). This will confirm the consistency or reliability of 
different variables used to estimate an event. The Cronbach‟s alpha reliability coefficient 
is expressed mathematically, in ratio terms that normally range between 0 and 1. The 
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closer the alpha coefficient is to 1 the greater the internal consistency. The reliability test 
of Cronbach alpha of 0.7 or greater will be accepted as a good indication of a reliable 
measure (Hair et al., 2010). However, a lower limit of Cronbach alpha of 0.6 or less will 
not be acceptable and hence not reliable to test a phenomenon (Sekaran, 2003). The 
reliability test was used in analysing each of the variables; core service quality, 
relationship quality, tangibles, customer satisfaction, loyalty and switching cost.  
 
Regression analysis as well as correlation was used in the study. Regression analysis is 
useful in determining and/or explaining the independent variables to a dependent variable. 
It can determine the association between variables as well as their significance level. 
Multiple regression analysis was used to determine the relationship between core service 
quality, relationship quality and tangibles (as independent variables) and satisfaction (as a 
dependent variable). Secondly, another linear regression was made to test the relationship 
with customer satisfaction and loyalty. Finally, the stepwise regression test was conducted 
to assess the significance of each of the variables of switching costs. 
 
 Subsequently a correlation test was conducted. The correlation analysis measures the 
association between variables. The correlation coefficient is denoted by the symbol (r) 
and ranges between -1 and +1 which indicates the direction and strength of the linear 
association between the two variables. The correlation between two variables can be 
positive (which means higher level of one variable are associated with higher level of the 
other) or negative (which implies that higher level of one variable are associated with 
lower level of the other). A correlation close to zero suggests no linear association 
between two continuous variables (Aiken & West, 1991). 
 
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Moderation refers to the interaction effect between two variables, where introducing a 
moderating variable changes the direction or relative significance of the relationship 
between the variables (Aiken & West, 1991).  
A moderation effect could be: 
1. Enhancing, where increasing the moderator would increase the effect of the 
predictor (x) on the outcome (y); or 
2. Buffering, where increasing the moderator would decrease the effect of the 
predictor on the outcome; or 
3. Antagonistic, where increasing the moderator would reverse the effect of the 
predictor on the outcome.  
 The SPSS statistical software was used for the analysis in this study. The statistical 
analysis offered descriptive and graphical inferences on the responses from the policy- 
holders which enriched the study. 
 
4.8 Model Estimation and Measurement of Variables 
To test the relationship between core service quality, relationship quality and tangibles to 
customer satisfaction and subsequently test the relationship between customer satisfaction 
and loyalty by moderating switching costs in the life insurance industry, the equations 
below were developed: 
 
To test the effect of customer satisfaction, 
 TanBRQBCSQBBsat 3210  
Stage 1; Mulitple Regression Equation 
Sat = Customer satisfaction (Dependent variable) 
X1= Core service quality (Independent variable) - CSQ 
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X2 = Relationship quality (Independent variable) - RQ 
X3= Tangibles (Independent variable) - Tan. 
B0 = Constant of the equation 
e = Error Term 
 
To test the effect of customer loyalty, 
 
Stage 2: Linear Regression Equation 
Loy = Customer loyalty (Dependent variable) 
X1 = Customer satisfaction (Independent variable) - Sat 
B0 = Constant of the equation 
B1 = Standardized Beta co-efficient of Customer satisfaction - Sat 
e = Error Term 
 
To test the moderating effect of switching costs on the relationship between customer 
satisfaction and loyalty, 
 
Stage 3: Moderated Regression Equation 
Loy = Customer loyalty (Dependent variable) 
X1 = Customer satisfaction (Independent variable) - Sat 
X2 =   Switching cost (Moderating variable) – Sc 
B3 = Satisfaction and Switching cost – Sat*Sc 
B0 = Constant of the equation 
B1 = Standardised Beta co-efficient of Customer satisfaction 
B2 = Standardised Beta co-efficient of Switching cost 
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B3 = Standardised Beta co-efficient of Satisfaction by Switching costs 
e = Error Term 
 
Approach to Moderation (Switching Costs - High or Low) 
Step 1- Customer satisfaction is presumed to cause Loyalty in the life insurance industry 
Step 2- Apply the median or mean method to classified customer response into low 
switching costs (below median) and high switching costs (above median) on a 
questionnaire anchored on  the Likert scale (1-strongly disagree; 5- strongly agree).  
Step 3- Multiply the customer satisfaction with switching costs to create the interaction 
term 
Step 4- Does switching costs alter the strength of the causal relationship? 
Step 5 – Complete moderation occurs when the causal effect of Customer satisfaction on 
Loyalty goes to zero with the addition of the moderator (Kenny, Kashy & Bolger, 1998). 
 
4.9 Ethical Considerations for the Study 
In conducting the study, the issue of ethics was of outmost importance to protect 
respondents from any liabilities or issues that might affect them after completion of the 
questionnaire. Ethical issues considered in the study include asking clear and short 
questions devoid of ambiguity; managing confidential information collected through the 
study and putting in place measures to protect the identity of respondents. Additionally, 
the researcher distanced himself from the research and therefore reduced any possible 
bias.   
 
The respondents were mainly workers. The closed-ended questionnaires were 
administered which required respondents to tick suitable answers making it less time 
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consuming to complete the questionnaire. The study sought the prior approval of 
respondents before answering the questionnaires. Respondents were informed of the 
intention of the study to be for academic purposes only, which was also clearly stated in 
the questionnaires.   
 
4.10 Limitations of the Study 
The study intended to obtain information from policy-holders in the life insurance 
industry of Ghana. However, the study was limited to the responses of policy-holders in 
Accra because of, the timeframe of this research and resource constraints. Moreover, the 
sample size selected was a fair representation of the population, since most of the 
insurance companies have their head offices or representation in Accra, the capital city of 
Ghana. This provides a basis for the findings to be generalized to the life insurance 
industry.  
 
This study adopted the quantitative approach to research in its analysis. The Ghanaian 
insurance industry provides life insurance and general insurance policies for its citizenry. 
Furthermore, the industry operates with supporting bodies such as brokers, agents and 
some banks in delivering its services. However, the study was limited to issues relating to 
life insurance. The data collection process was not without challenges since most policy- 
holders are workers of companies and institutions and the researcher had to persist to get 
the attention of the respondents to complete the questionnaires.  
 
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CHAPTER FIVE 
DATA ANALYSIS AND DISCUSSION OF FINDINGS 
 
5.0 Introduction 
This chapter presents the analysis and interpretation of the empirical data collected for the 
study. The study sample consists of randomly selected customers of seven insurance 
companies in Accra, namely, the SIC Life; Enterprise Life; Glico Life; Starlife 
Assurance; Provident Life; Metropolitan Life and Vanguard Life Assurance. The broad 
objective of the study was to assess the relationship among the variables and moderate 
switching cost on the relationship between customer satisfaction and loyalty. 
 
In general, a total of 420 questionnaires were distributed to respondents of which 353 
were retrieved and merited evaluation for inclusion in the analysis. Thus, the study 
obtained 84.05% response rate.  
 
The chapter employs descriptive mean analysis, a correlation and a regression test to 
unravel its specific objectives. The presentation of the analysis and interpretation of the 
data follows. 
 
5.1 Background/Demographic Information 
This section of the chapter reports on the biographical data of respondents who 
participated in the study. The major components are respondents‟ gender, age, educational 
level, years spent in the policy and type of insurance held.  
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5.1.1 Gender 
On the basis of gender, the study found as many as 193 (54.7%) of the respondents to be 
females whereas males constituted less than half 160 (45.3%) of the respondents. 
 
5.1.2 Age 
Greater proportions of the sample (128 representing 36.3% of the respondents) were found 
in the age category of 40 to 49. This was closely followed by 114 (32.3%) of the 
respondents who were in the age category of 30 to 39 and 74 (21%) in the age category of 
fifty years and above. The age category least represented in this study was 20 to 29, which 
constituted 37(10.4%) of the total respondents.  
 
5.1.3 Level of Education 
Most of the respondents to the study were educated; those with university degrees were 138 
representing the majority (39.1%). This was followed by 101 (28.6%) with various diploma 
certificates and 36 (10.2%) with post graduate degrees. There was a significant portion (78 
representing 22.1% of the respondents) held some professional certificate. Considering the 
educational background of the respondents, it is evidence that most of the customers who 
subscribe to insurance in Ghana are the educated populates in society.  
 
5.1.4 Years on Policy 
The study collected information on the period of time respondents have subscribed to the 
insurance policy. From the responses, it is noted that as many as 161 (45.6%) of the 
respondents have had the insurance policy for a period of 4 to 6 years. This was followed by 
80 (22.7%) of the respondents who have had the policy for 7 to 10 years and 72 (20.4%) 
who reported having the policy 1 to 3 years. The least represented group was respondents 
who had the policy for more than ten years accounting for only 40(11.3%).  
 
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5.1.5 Type of Policy 
The majority of the respondents had subscribed to a full risk insurance policy, (254 
representing 72 percent), whereas 99 representing 28 percent of the respondents have 
subscribed to risk plus investment policy.  
5.1.6 Biographic Data of Policy-holders 
Summary of the biographic data of respondents of the life insurance companies. 
 Table 7: Background Information on Respondents 
Variables   Frequency   Percent 
Gender     
Male  160  45.3 
Female  193  54.7 
Total 
 
Type of policy 
Full Risk 
Risk plus Investment 
Total 
 353 
 
 
254 
99 
353 
 100.0 
 
 
72 
28 
100 
     
Age     
20 – 29  37  10.4 
30 -39  114  32.3 
40 – 49  128  36.3 
50 years and above  74  21 
Total  353  100.0 
     
Educational Level     
Diploma  101  28.6 
Degree  138  39.1 
Professional  78  22.1 
Post Graduate  36  10.2 
Total  311  100.0 
     
Years on Policy     
1 – 3  72  20.4 
4 – 6  161  45.6 
7 – 10  80  22.7 
Above 10 years  40  11.3 
Total  353  100.0 
        Source: Field data, 2015 
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5.2 Reliability Analysis 
The questionnaire for the study contained five sections. The first section sought the 
respondents‟ background information, while the subsequent sections contains 40 items on 
core service quality, relationship quality, tangibles, customer satisfaction, loyalty and the 
moderating switching costs. The questionnaires were administered randomly to policy-
holders of the seven life insurance companies. Participants responded to the items using a 
5-point Likert scale ranging from 1(“Strongly Disagree”) to 5 (“Strongly Agree”). The 
items were phrased so that strong agreement indicated a measure that the respondent‟s 
insurance provider has positive and high functionality of the measuring item.  
 
Reliability of the measures was assessed by the use of Cronbach‟s alpha „α‟. Cronbach‟s 
alpha provides an estimate of the internal consistency of the measures (Hair et al., 2010). 
Thus, the researcher tested the consistency or reliability of the different variables. 
Cronbach‟s alpha reliability coefficient normally ranges between 0 and 1. The closer the 
alpha coefficient is to 1 the greater the internal consistency. George and Mallery (2003) 
showed that, alpha greater than or equal to 0.7 is acceptable and a good indication of a 
reliable measure. The Cronbach‟s alpha for core service quality, relationship quality and 
tangibles respectively scored 0.783, 0.794 and 0.852. Similarly, customer satisfaction and 
customer loyalty items respectively obtained reliability scores of 0.783 and 0.742. Finally, 
switching costs measures (financial cost, procedural cost and relational cost) respectively 
obtained 0.711, 0.697, and 0.745 as their reliability score. Considering the scores above, 
all items were found to be valid and were included in the analysis. Table 8 below provides 
further details of these scores. 
 
 
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Table 8: Reliability Statistics 
Variables No. of Items Cronbach’s Alpha 
Core Service Quality 4 0.783 
Relationship Quality 12 0.794 
Tangibles 
                                   
Customer Satisfaction 
 
4 
 
5 
0.852 
 
0.783 
Customer Loyalty 5 0.742 
      Financial Switching Cost 4 0.711 
Procedural Switching Cost 3 0.697 
Relational Switching Cost 3 0.745 
Source: Field data, 2015 
 
5.3 Testing for Multicolinearity 
The researcher tested for the presence of multicolinearity in the use of multiple 
regression. The variance inflating factor (VIF) test was conducted to access the extent to 
which multicolinearity was a problem. The rule of thumb is that when the VIF exceeds 
10, then multicolinearity is not a problem (Gujarati, 2004). 
5.3.1 Antecedents of Customer Satisfaction (Independent Variables) 
The test revealed that, none of the variables has a variance inflating factor which is less 
than 10. This is an indication that multicolinearity was not a problem in the study. The 
assumption regarding multicolinearity was not violated therefore the researcher could 
successfully proceed to perform the regression test. This implies that, all the variables 
were found to be in acceptable region for the regression test. See Table 9 below for more 
details.  
 
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Table 9: Results for Variance Inflating Factor 
 
     
 
 
 
 
 
     
Source: Field data, 2015 
 
5.4 Core Service Quality 
In a bid to examine the operations of core service quality among Ghanaian life insurance 
companies in the delivery of services to their client, respondents were asked to rate 
measuring items of core service quality. The statement, “my insurance provider provides 
fast service” accorded the most approval rating from the respondents. On the other hand, 
respondents least agreed to the statement “my insurance provider has competitive 
premiums and charges”. In general, respondents approved the existent of the operations of 
core service quality in the delivery of service among the insurance companies up to 
„agreed‟ level as it was represented by an aggregated mean of 4.11. See Table 10 for 
results 
 
5.5 Relationship Quality 
Respondents in general approved of the level of relationship quality (Mean = 4.25). This 
implies that the responses on relationship quality in the service delivery among the 
insurance companies are at as „agreed‟ level. Specifically, the statement that respondents 
most agreed to was the fact that the agents and/or the sales-persons of the insurance 
companies can be relied upon as they do keep their promises. In furtherance, the 
Variable VIF 
Core Service Quality 
Relationship Quality 
Tangibles 
1.32 
1.41 
1.66 
Mean VIF 1.46 
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statement “My insurance agent/salesperson puts the customers‟ interest before his/her 
own” received the least approval from the respondents. Analysis of results is shown in 
Table 10 below. 
 
5.6 Tangibles in Service Delivery  
The study assessed the tangibility component of service delivery among the selected 
insurance providers. The study recorded an overall mean rating of 4.07 as aggregated 
from respondents‟ score ratings and this represents a general view of high performance on 
the basis of tangibility by the insurance providers. Specifically, the statement that 
respondents most affirmed with high performance on tangibility was the fact that 
materials associated with the services of the insurance providers are visually appealing. 
On the other hand, the statement which attracted the least approval from the respondents 
was the fact that the insurance companies have modern looking facilities.  See Table 10 
for the statistical results. 
 
5.7 Assessment of Customer Satisfaction, Loyalty and Switching Costs  
This section examines and analyzes responses obtained from respondents regarding their 
satisfaction, loyalty and switching costs in service delivery. An overall mean and standard 
deviations were calculated for the purpose of comparison. Below are the presentations of 
the analysis. 
 
5.8 Customer Satisfaction 
The result obtained from the analysis of data on satisfaction with services delivered by the 
insurance providers suggests that customers in general were satisfied, with an overall 
mean rating of 4.23 on the 5 point scale. Individually, the statement that attracted the most 
satisfactory rating from the respondents is “my insurance company meets my expectations 
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of a good insurance provider” while the statement “I am very satisfied with products 
offered by my insurance company” attracted the least approval rating from the 
respondents. See Table 10 for results.  
 
5.9 Customer Loyalty 
On the assessment of customer loyalty, the study recorded a general positive approval 
rating (M = 4.30, SD = 0.31) from the respondents. The respondents gave the highest 
favorable rating for the statement, “I will encourage friends and relative to use the 
services of my insurance provider” from the respondents. On the other hand, respondents 
least agreed with the statement “I say positive things about my insurance provider to other 
people”. An analysis of results is evidence in Table 10 below. 
  
5.10 Switching Costs (Moderating Variables) 
5.10.1Financial Switching Cost 
This section examines and analyzes responses obtained from respondents regarding their 
financial cost associated with insurance companies in Ghana. The responses suggest that 
customers, in general terms, recognize the effect of financial cost, with an overall mean 
rating of 4.50 with its standard deviations of 0.31. The most financial cost rating from the 
respondents is “my insurance company pays significantly large claims (Sum Assured)”. 
The statement “my insurance company‟s allows me to assess some portion of my policy 
periodically” attracted the least approval rating from the respondents. The analysis of 
results is evidence in Table 10 below. 
  
 
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5.10.2 Procedural Switching Cost 
The general approval given to the procedural cost component of insurance companies was 
found to be high. This is presented by an overall approval mean rating of 4.65. 
Individually indicator approval ratings were found to be high. The statement found to 
gained the most favorable approval ratings from the respondents was “It will require me 
to have some waiting period to assess claims” while the least approval was given to the 
statement “life insurance policy is long term in nature”. An analysis of results is evidence 
in Table 10 below. 
 
5.10.3 Relational Switching Cost 
The respondents in general terms agreed that the relational switching cost was at a 
moderate level (M = 4.42, SD = 0.48). The statement that respondents most agreed with 
was that, in general, it will be a hassle switching to another insurance company. On the 
other hand, customers agreed to the statement “I am more comfortable interacting with 
the people working for my service provider than I would be if I switched provider”. An 
analysis of results is shown in Table 10 below. 
 
 
 
 
 
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Table 10: Descriptive Statistics 
Variables 
 
M SD 
Core Service Quality 
 
4.11 0.20 
Relationship Quality  
 
4.25 0.18 
Tangibles 
 
4.07 0.17 
Customer Satisfaction 
 
4.23 0.30 
Customer Loyalty 
 
4.30 0.31 
Financial Switching Cost 
 
4.50 0.31 
Procedural Switching Cost 
 
4.65 0.37 
Relational Switching Cost 
 
4.42 0.48 
Total 
 
4.32 0.11 
 Source: Field data, 2015 (NB: N=353) 
 
  
5.11 Significance Test 
5.11.1 Discussion of Major Findings  
The objective of the study was to determine the relationship between core service quality, 
relationship quality, tangibles and customer satisfaction to loyalty by moderating the 
effect of switching costs. The antecedents of customer satisfaction identified from 
literature include core service quality, relationship quality and tangibles while its outcome 
constituted customer loyalty in the life insurance industry of Ghana. The study measured 
the relationship and associations between these constructs. Analysis from the study has 
revealed that, core service quality, relationship quality and tangibles had a positive 
relationship with customer satisfaction and subsequently loyalty. Similarly, the Pearson 
correlation test of significant was performed to identify the associations among the 
variables.  
The study found a moderate and positive association between relationship quality and 
customer satisfaction in the Ghanaian life insurance industry with a correlation coefficient 
value of (r = 0.494). On the other hand, core service quality was found to have a relatively 
stronger and positive association with customer satisfaction at a correlation coefficient 
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value of (r = 0.509). While tangibles associated with service delivery in the life insurance 
industry was found to have a positive and moderate association between tangibles and 
customer satisfaction at a correlation coefficient value of 0.482 that produced a significant 
value of 0.000. 
 
Similarly, the study found a positive and relatively stronger association between customer 
satisfaction and customer loyalty with a correlation coefficient value of 0.734 and a 
significant value of 0.000. Finally, the moderating variables equally showed positive 
correlation values. See Table 11 for details. 
The positive association among the variables implies that as one variable improves in 
performance, it influences the other to equally improve in the life insurance industry. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Table 11: Pearson Correlation Test Results 
 CS CL CSQ RQ Tan FSC PSC RSC 
CS 1  
 
      
CL .734** 
.000 
1       
CSQ .509** 
.000 
.310** 
.000 
1      
RQ .494** 
.000 
.761** 
.000 
.162** 
.002 
1     
Tan .482** 
.000 
.350** 
.000 
.214** 
.000 
.262** 
.000 
1    
FSC .419** 
.000 
.386** 
.000 
.124* 
.020 
.251** 
.000 
.346** 
.000 
1   
PSC .204** 
.000 
.257** 
.000 
.159** 
.003 
.191** 
.000 
.030 
.578 
.236** 
.000 
1  
RSC .139** 
.009 
.177** 
.001 
.032 
.553 
.119* 
.025 
.112* 
.036 
.440** 
.000 
.248** 
.000 
1 
** Correlation is significant at the 0.01 level (2-tailed). NB (N=353) 
* Correlation is significant at the 0.05 level (2-tailed). 
Source: Field data, 2015 
 
 
 
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5.12 Objectives Test 
5.12.1 Regression Test of the Antecedents of Customer Satisfaction 
A multiple linear regression test was performed between core service quality, relationship 
quality and tangibles as independent variables and customer satisfaction as a dependent 
variable. The test revealed a statistically significant relationship (F = 123.467, P < 0.05).  
This means that the independent variables jointly influence the dependent variable 
significantly at (r = 0.719) which implies that there is a strong positive association 
between the independent variables and the dependent variable. The R Square value of 
0.517 is an indication that the independent variables jointly determine 51.7% of 
variability in customer satisfaction.   
Comparatively, core service quality was found to have the highest predictive capacity of 
customer satisfaction among the variables used, which is evidence as the highest beta 
coefficient of 0.392. See Table 12 for details.  
 
 
 
 
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Table 12: Regression Relation between Core Service Quality (CSQ), Relationship   
Quality (RQ), Tangibles (tan.) and Customer Satisfaction (CS) 
 
 
 
 
 
 
Source: Field data, 2015 
 
5.12.2 Objective 1 
To identify the relationship between core service quality and customer satisfaction in 
the Ghanaian life insurance industry: 
The study tested for the relationship between core service quality and customer 
satisfaction. Core service quality is also referred to as the outcome of the service delivery 
(Levesque & McDougall, 1996). Similarly, Brogowicz et al., (1990) referred to core 
service as the “what” of a service offering.  
 
The study found a positive and significant relationship between core service quality and 
customer satisfaction. This implies that the outcome of service delivered in the insurance 
industry is very relevant to the policy-holder and as such, an improvement in core service 
delivery will increase customer satisfaction in the life insurance industry. The regression 
coefficient of core service quality to customer satisfaction is positive. The path coefficient 
is statistically significantly (β = 0.392, p< 0.05).  Based on the findings, the first objective 
has been achieved. This means that, core service quality has a significant impact on 
Variable   β S.E T Prob. 
Constant 
  
.216 2.071 .000 
CSQ 
 
.392 .030 10.185 .000 
RQ 
 
.341 .023 8.748 .000 
Tan. 
 
.309 .048 7.850 .000 
      R .719 
  
F-statistic 123.467 
R-Square .517     Prob. (F-stats.)  0.000 
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customer satisfaction, which is consistent with previous studies (McDougall & Levesque, 
2000; Chen & Wang, 2009; Narteh & Kuada, 2014). See Table 12 for statistical details. 
 
5.12.3 Objective 2 
To examine the relationship between relationship quality and customer satisfaction 
in the Ghanaian life insurance industry: 
The study found a positive and significant relationship between relationship quality and 
customer satisfaction in the life insurance industry of Ghana. The relevance of 
relationship quality has been established in this study. According to Ndubisi (2007), 
relationship quality could be achieved through the service employees‟ efficient 
communication and behaviour that can reduce perceived uncertainty and increase 
customer satisfaction. Similarly, relationship quality has been referred to as the process 
aspects of the service delivery (Parasuraman et al., 1991; Morgan & Piercy, 1992; 
McDougall & Levesque, 2000). 
 
The regression coefficient of relationship quality to customer satisfaction is positive. The 
path coefficient is statistically significantly (β = 0.341, p< 0.05).  Based on the findings, 
the second objective has been achieved. This implies that, relationship quality has a 
significant impact on customer satisfaction. The result of the analysis is consistent with 
that in the literature (Crosby et al., 1990; Chen & Wang, 2009; Narteh & Kuada, 2014). 
See Table 12 for statistical details. 
 
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5.12.4 Objective 3 
To evaluate the relationship between tangibles associated with service delivery and 
customer satisfaction in the Ghanaian life insurance industry: 
The study found a positive and significant relationship between tangibles and customer 
satisfaction in the life insurance industry of Ghana. The regression coefficient of tangibles 
to customer satisfaction is positive. The path coefficient is statistically significantly (β = 
0.309, p< 0.05).  Based on the findings, the third objective has been achieved. This 
implies that, tangibles associated with service delivery have a significant impact on 
customer satisfaction, which is consistent with the literature (Narteh & Kuada, 2014). See 
Table 12 for statistical details. 
 
5.12.5 Objective 4 
To evaluate the relationship between customer satisfaction and loyalty in the 
Ghanaian life insurance industry: 
A simple linear regression relationship test was performed between customer satisfaction 
and loyalty, which produced a statistically significant effect of the independent variable 
on the dependent variable. An F-statistic of 410.387 was found to be significant at 0.000. 
In sum, the analysis found that customer satisfaction can predict customer loyalty up to a 
level of R square of 53.9%.  
 
The study eventually established a positive and significant relationship between customer 
satisfaction and loyalty. Oliver, (1999) described satisfaction as a customer‟s judgment 
that the consumption of a product or service is providing a pleasurable level of fulfillment 
of the customers‟ needs, desires, and goals.  
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Findings from the regression analysis have revealed that the coefficients of customer 
satisfaction is equally significantly (β = 0.734, p< 0.05). The findings strongly support the 
objective that customer satisfaction is an important determinant to customer loyalty, 
which is consistent with the literature (McDougall & Levesque, 2000; Tsoukatos & Rand, 
2006; Chen & Wang, 2009; Rai & Medha, 2013; Narteh & Kuada, 2014). See Table 13 
for statistical details.  
 
Table 13: Regression Relation between Customer Satisfaction and Loyalty 
Variable   β S.E T Prob. 
Constant 
  
0.157 7.219 0.000 
Satisfaction 
 
0.734 0.037 20.258 0.000 
      R 0.734 
  
F-statistic 410.387 
R-Square 0.539     
Prob. (F-
stats.)  
0.000 
Source: Field data, 2015 
 
 
5.12.6 Objective 5 
To identify the impact of perceived high switching costs on the relationship between 
customer satisfaction and loyalty in the Ghanaian life insurance industry: 
 
The moderating test was conducted based on the mean value of switching costs responses 
where all responses anchored on 1-strongly disagree to 5- strongly agree was divided by 
the total number of respondents (mean = 4.5). The result indicates that 225 respondents 
were identified as the high switching costs group, while 128 were found to be of the low 
switching costs group. The use of median or mean split is common in moderation tests 
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(Aydin, Ozer & Arasil, 2005; Olsen, 2007; Chen & Wang, 2009; De Matos et al., 2009). 
Prior to forming a product term to represent an interaction between switching costs and 
customer satisfaction, scores on both variables were centered by subtracting the sample 
mean. Subsequently, two moderated regression analyses were conducted to test the effect 
of customers‟ perceived low and high switching costs in the relationships.  
 
Model 1: Switching costs (low). The coefficient of the interaction term for switching 
costs (low) and customer satisfaction in the moderated regression analysis found a non-
significant interaction effect with customer loyalty (β = -.028, t = -.487, p>0.05=.627). 
The model for customer perception of low switching costs is insignificant and therefore 
cannot improve the relationship between customer satisfaction and loyalty. This implies 
that policy-holders of the life insurance companies who perceive the switching costs to be 
low continued to remain loyal as a result of the satisfaction they derive from service 
delivery. 
 
Model 2: Switching costs (high). Contrary to customers‟ perceived low switching costs 
being insignificant, the coefficient of the interaction term for customers‟ perceived high 
switching costs and customer satisfaction, the moderation effect on the regression analysis 
found a significant interaction effect with customer loyalty (β = 0.112, t = 2.178, p< 0.05). 
From the findings, the fifth objective has been achieved. This means that, customers‟ 
perceived high switching costs significantly improves the relationship between customer 
satisfaction and loyalty in the Ghanaian life insurance company. This implies that the 
majority of the policy-holders in the life insurance industry continued to remain loyal as a 
result of satisfaction and perceived high switching costs associated with the industry. 
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The finding of the study is consistent with previous studies (Gronhaug & Gilly, 1991; Lee 
et al., 2001; Yang & Peterson, 2004; Chen & Wang, 2009; De Matos et al., 2009). See 
Table 14 for details.  
 
 
Table 14: Regression Model - Low and High Customer Perceive Switching Costs 
Model  Variable  Beta  t- Stat.  P > T  r  R 
square  
F –stat. 
change  
Prob 
> F  
Stand. 
Error  
1  (Constant)   4.130  .000  .807  .651  234.631  .000  .21266  
 satisfaction  .807  15.318  .000       
 (Constant)   3.354  .001  .807  .651  .237  .627  .20046  
 satisfaction  .818  14.088  .000       
Low  switching 
costs  
 
-.028  -.487  .627       
2  (Constant)   7.090  .000  .635  .403  150.723  .000  .20046  
 satisfaction  .635  12.277  .000       
 (Constant)   1.220  .224  .645  .416  4.743  .030  .19880  
 
 
High  
Satisfaction 
 
Switching 
costs  
.627 
 
.112  
12.199 
 
2.178  
.000 
 
.030  
     
a. Predictors: (Constant), Customer_Satisfaction 
b. Predictors: (Constant), Customer_Satisfaction, Switching Cost 
c. Dependent Variable: Customer_Loyalty 
 
Source: Field data, 2015 
 
5.13.0 Hypothesis Test 
 
5.13.1 Stepwise Regression (Hypothesis 1, 2, 3) 
 
In order to test the hypothesis, a stepwise regression test was conducted to establish the 
relationship between core service quality, relationship quality, tangibles and customer 
satisfaction in the Ghanaian life insurance industry. The study found the independent 
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variables to be significant and that explains 51.7% of the variations in the dependent 
variable, with a correlation coefficient of r = 719. The results, therefore, confirm 
hypothesis 1, 2 and 3, which indicates that core service quality, relationship quality and 
tangibles associated with insurance delivery, has a positive and significant relationship 
with customer satisfaction. See Model 1 of Table 15 for statistical details. 
 
5.13.2 Hypothesis 4 
 
The result of the study supports the fourth hypothesis, which states that there is a positive 
and significant relationship between customer satisfaction and loyalty in the Ghanaian life 
insurance industry. According to the study, customer satisfaction is highly significant and 
can predict up to 53.9% of the variations in the loyalty of policy-holders in the life 
insurance industry. Based on the finding the hypothesis is supported. See Model 2 of 
Table 15 for statistical details. 
 
 
5.13.3 Hypothesis 5 
 
In order to assess the significance of the switching costs on the relationship between 
customer satisfaction and loyalty in the Ghanaian life insurance industry, the stepwise 
regression analysis was again performed to assess the moderating effect of the 
components of switching costs on customer satisfaction and loyalty. The regression 
included switching costs, customer satisfaction and the cost_satisfaction interaction term 
as predictors of customer loyalty. Standardized regression coefficients are reported, unless 
otherwise stated.  
 
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From Model 2: The relationship between customer satisfaction and loyalty was 
statistically significant, r = 0.734, R2 = 0.539, F= 410.387, p< 0.05. This will form the 
basis to introduce the moderating variables, namely, financial switching cost, relational 
switching cost and procedural switching cost.  
 
From Model 3: With the introduction of the moderating variable (financial switching 
cost) the overall regression improved significantly, r = .739, R2 = .546, F- stat = 210.886, 
p < 0.05. Financial cost was found to significantly moderate the relationship between 
customer satisfaction and loyalty (β = 0.095, p = 0.017). This implies that the financial 
switching cost in the life insurance industry influences policy-holders to remain loyal to 
their current service providers. 
 
From Model 4: Similarly, when the procedural switching cost was introduced with the 
financial switching cost in the stepwise regression analysis both were found to 
significantly moderate customer satisfaction to loyalty in the Ghanaian life insurance 
industry. The effect of procedural switching cost resulted in overall regression 
improvement, r = .742, R2 = .0551, F- stat = 214.743, p < 0.05. Procedural switching cost 
was found to significantly moderate the relationship between customer satisfaction and 
loyalty (β = 0.112, p = 0.002). This implies that the procedural switching cost in the life 
insurance industry can equally influence policy-holders to remain loyal to their current 
service providers. 
 
Subsequently, relational switching cost were found not to be significant and could not 
moderate the relationship between customer satisfaction and customer loyalty since it had 
a coefficient value (β = 0.054, p = 0.143, r = .742, R2 = .0551, F- stat = 214.743). The 
regression values were found to be constant with the introduction of relational cost to 
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financial and procedural cost. This implies that the relationship switching costs is 
necessary in the life insurance industry but it does not influence customer loyalty. Based 
on the findings, the fourth objective has been achieved. 
These findings are not consistent with the study by Burnham et al. (2003), who found all 
switching costs variables (relational, financial and procedural) significantly moderate the 
relationship between customer satisfaction and loyalty.  
 See Table 15 for statistical details. 
 
Table 15: Stepwise Regression Test  
Model  Variable  Beta  t – 
Stat.  
Prob 
> T  
r  R 
square  
F - stat  Prob 
> F  
Stand 
Error  
1 
 
 
 
 
  
 
 
2 
 
(Constant) 
 
CSQ               
 
RQ 
 
Tan. 
 
(Constant)  
 
. 
.392 
 
.341 
 
.309 
2.071 
 
10.185 
 
8.748 
 
7.850 
 
7.219  
.000 
 
.000 
 
.000 
 
.000 
 
.000  
.719 
 
 
 
 
 
 
 
.734  
.517 
 
 
 
 
 
 
 
.539  
123.467 
 
 
 
 
 
 
 
410.387  
.000 
 
 
 
 
 
 
 
.000  
.21091 
 
 
 
 
 
 
 
.20983  
 Satisfaction  .734  20.258  .000       
 
3  
 
(Constant)   
 
4.723  
 
.000  
 
.739  
 
.546  
 
210.886  
 
.000  
 
.20841  
 Satisfaction  .694  17.514  .000       
 Financial 
cost  
.095  2.406  .017       
4  (Constant)   4.143  .000  .742  .551  214.743  .000  .20738  
 Satisfaction  .711  19.444  .000       
 Financial 
cost  
.088  1.934  .024       
 Procedural 
cost  
.112  3.057  .002       
a Predictors: (Constant), Core Service Quality, Relationship Quality, Tangibles 
b Dependent Variable: Customer_Satisfaction 
c  Predictors: (Constant), Customer_Satisfaction, M_Relational_Cost, M_Financial_Cost, M_Procedural   
d Dependent Variable: M_Customer_Loyalty 
 
Source: Field data, 2015 
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Table 16: Summary of Hypothesis for the Study 
 
Hypothesis   
Sig. 
Value   Decision 
1. Core service quality has a significant positive effect on 
customer satisfaction 0.000 
 
Accepted 
     2.Relationship quality has a significant positive effect on 
customer satisfaction 0.000 
 
Accepted 
 
3.Tangibles will have a significant positive effect on 
satisfaction 0.000 
  
Accepted 
 
 
4.Customer satisfaction has a significant positive 
relationship with customer loyalty 0.000 
 
Accepted 
     
5.Significant effect of switching cost on the relationship 
between customer satisfaction and loyalty in the 
Ghanaian life insurance industry 0.000   Accepted 
Source: Field data, 2015 
 
 
 
 
 
 
 
 
 
 
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CHAPTER SIX 
SUMMARY, CONCLUSIONS AND RECOMMNDATIONS 
6.0 Introduction  
This chapter summarizes the findings of the study based on the interpretation of the data 
analyses collected from policy-holders in the life insurance industry. The study was 
conducted to explain the impact of switching costs on the relationship between customer 
satisfaction and loyalty by employing quantitative techniques to elicit the responses of 
policy-holders. The findings of the study confirmed most facts attested by literature. 
Conclusions were drawn by relating the findings to literature and explaining its 
implications to service providers within the life insurance industry. This chapter 
concludes by providing suggestions and recommendations for future research.  
 
6.1 Summary 
The impact of customer satisfaction and loyalty has gained much attention in the 
marketing literature. The study identified three key determinants of customer satisfaction 
from literature. These variables include core service quality, relationship quality and 
tangibles, which is consistent with studies in the service industry (Chen & Wang, 2009; 
Narteh & Kuada, 2014). Subsequently, the relationship between customer satisfaction and 
loyalty was equally confirmed in this study. The relevance of this relationship varies in 
relationship with customers‟ perception of high or low switching costs associated with 
exchange relationships. The study confirmed that perceived high switching costs 
associated with the life insurance industry influence policy-holders to remain loyal. The 
study further identified the moderating effect of switching costs in the relationship 
between customer satisfaction and loyalty in the life insurance industry of Ghana. In 
relation to switching costs, existing literature has confirmed the overall attributes of 
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switching costs to include financial, relational and procedural costs which were used in 
the study (Burnham et al., 2003; De Matos et al., 2009).  
 
The researcher administered 420 questionnaires to policy-holders of seven insurance 
companies who agreed to be part of the study through some selected branches. The 
sample size chosen was in relation to prior studies conducted in customer satisfaction and 
loyalty. The data was then analyzed using descriptive analysis to identify the biographic 
data of policy-holders as well as their responses to the questionnaire. The questionnaire 
was developed from items adapted from existing literature. The study further conducted 
the correlation test to identify the association between the variables and subsequently the 
regression test was conducted to assess the extent to which an independent variable 
predicts the dependent variable in the insurance industry.  
     
6.2 Major Findings 
The outcome of the study is summarized in relation to the objectives of the study. 
Objective 1 
The first objective of this study was to find the relationship between core service quality 
and customer satisfaction in the Ghanaian life insurance. The regression test was 
conducted to identify the relationship between core service quality and customer 
satisfaction. The relative importance of core service quality was established to be the 
highest predictor of customer satisfaction in the life insurance industry. The test found a 
positive and moderate relationship between core service quality and customer satisfaction. 
This implies that the policy-holders consider fast and accurate services as well as 
competitive premiums and charges to influence their satisfaction in the life insurance 
industry. 
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Objective 2 
The second objective of this study sought to identify the relationship between relationship 
quality and customer satisfaction in the Ghanaian life insurance industry. The significance 
of relationship quality was established in the study as the second predictor of customer 
satisfaction in the life insurance industry. This may explain the fact that insurance 
products are policy documents that usually need sales-persons or agents to clarify certain 
terminologies or conditions for prospects as well as policy-holder in order to reduce any 
form of ambiguity associated with the policy. This implies that the sales-person or agent‟s 
relationship with the policy-holder as well as potential clients is relevant in increasing 
customer satisfaction. 
     
Objective 3 
The third objective of this study sought to identify the relationship between tangibles 
associated with service delivery and customer satisfaction in the Ghanaian life insurance 
industry. The relative importance of tangibles associated with service delivery was 
established in the regression test to have a positive and relatively moderate association 
with customer satisfaction in the life insurance industry. This implies that the policy-
holders value modern looking facilities of insurance companies, appearance of employees 
and documents associated with service delivery. 
      
Objective 4 
The fourth objective was to evaluate the relationship between customer satisfaction and 
loyalty in the Ghanaian life insurance industry. 
The study found a strong and significant relationship between customer satisfaction and 
customer loyalty. The analysis of data revealed core service quality, relationship quality 
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and tangibles positively influence customer satisfaction. Subsequently overall customer 
satisfaction significantly influences customer loyalty. In the insurance industry, policy- 
holders actually patronise the services of insurance companies rather than merely having 
positive values, belief and favourable intentions about their policies which may not result 
in purchase. This implies that the policy-holders in the life insurance industry can be 
described as behavioural loyal customers.   
 
Objective 5 
The fifth objective was to identify the effect of perceived high switching costs on the 
relationship between customer satisfaction and loyalty in the Ghanaian life insurance 
industry. 
The effect of customer perceived high switching costs was found to significantly 
moderate the relationship between customer satisfaction and loyalty. On the contrary, 
customer perceived low switching costs was found to be insignificant in this study. This 
implies that when policy-holders perceive switching costs to be high, the more they 
become loyal. The study used the mean method as a base to separate the customer 
responses of perceived high and low switching costs in the life insurance industry. 
 
The extent to which policy-holders perceived switching costs to be high or low may be 
influenced by three variables, namely, relational, procedural and financial cost. 
The study found financial and procedural costs to significantly moderate the relationship 
between customer satisfaction and loyalty in the insurance industry. This implies that 
perceived high switching costs associated with the life insurance industry is being 
influenced by procedural and financial cost.  
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6.3 Conclusions 
Existing literature has confirmed the impact of customer loyalty on the profitability of 
businesses (Reichheld, 1996). This study has confirmed that customer satisfaction 
significantly influences loyalty and therefore enhances the premium collection ability of 
insurance companies. Satisfaction has been established to form the basis of customer 
loyalty in the life insurance industry (Crosby et al., 1990; Colgate & Lang, 2001; Chen & 
Wang, 2009). 
 
This study has confirmed core service quality, relationship quality and tangibles as 
antecedents of customer satisfaction in the Ghanaian life insurance industry. The 
significance of the interaction effect of the switching costs has equally been established 
with financial and procedural cost being significant, while relational cost and was not 
significant in the study. The impact of customers‟ perceived high switching costs 
associated with the life insurance industry was established in the study. This implies that 
customers‟ perceived high switching influences the relationship between customer 
satisfaction and loyalty and subsequently influences a customer‟s decision to maintain 
exchange relations with the existing service provider. 
 
In conclusion, insurance companies, especially the new and relatively smaller ones, 
should be mindful of the impact of core service quality, relationship quality and tangibles 
associated with service delivery in the life insurance industry while developing lucrative 
switching costs, especially relating to financial and procedural costs in their operations. 
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6.4 Implications for Managers 
Insurance companies should invest their resources in developing the competence and 
product knowledge of their sales-persons and agents in order to improve upon the quality 
of interactions between sales-person or agent and policy-holders. Similarly, the efficient 
delivery of their core service is essential in ensuring satisfaction. This means insurance 
companies should invest in technologies needed to improve upon their core service 
delivery by providing fast and accurate services as well as competitive charges and 
premiums. Additionally, the physical attributes of the insurance companies, such as 
offices, branded cars, ambience and the physical appearance of employees should be 
appealing to communicate the ability of the insurance companies to pay claims as and 
when they fall due to any policy-holder. Finally switching costs associated with insurance 
should be designed to be very lucrative to enhance loyalty. The study has confirmed that 
over concentration of customer satisfaction alone is not enough to ensure customer 
loyalty. In the formulation of strategic decisions in the life insurance industry, managers 
must consider the relative importance of the dimensions of switching costs especially the 
financial and procedural costs in relation to the overall determinant of customer 
satisfaction to ensure loyalty. 
 
6.5 Implications for Theory 
Studies on switching costs as a moderating variable between customer satisfaction and that 
of loyalty is rare in the extant consumer behaviour literature, particularly, explaining these 
relationships from the social exchange theory perspective. This research therefore 
contributes to the literature on the role of switching cost on consumer intention to stay or 
change existing service provider. There is paucity of such studies in sub-Saharan African 
countries such as Ghana. The significance of the findings will enhance service delivery 
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and improve efficiency in the insurance sector, most importantly in the context in which 
the study was conducted.  
 
6.6 Study Limitations and Suggestions for Future Research 
The study was conducted in the life insurance industry of Ghana. The insurance industry         
consists of both life and general insurance. This study can be replicated in the general 
insurance industry of Ghana or any other service sector to confirm the research findings. 
The relevance of switching costs has been established in this study to influence customer 
loyalty. Future studies can explore other determinants of customer satisfaction and 
possible switching costs elements that are more lucrative to influence policy-holders to 
maintain their exchanges with their existing insurance companies. 
 
 
 
 
 
 
 
 
 
 
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APPENDIX 
 
 Questionnaire 
UNIVERSITY OF GHANA BUSINESS SCHOOL 
DEPARTMENT OF MARKETING AND CUSTOMER MANAGEMENT 
QUESTIONNAIRE FOR LIFE INSURANCE POLICY-HOLDERS 
(CUSTOMERS) 
 
I am an Mphil student of the University of Ghana Business School, undertaking a survey 
in the area of Customer Satisfaction and Loyalty: Assessing the moderating role of 
switching cost in the insurance industry. Kindly assist me by completing this 
questionnaire for academic purposes. The information you provide will only be used for 
the purpose of this study and will be treated with utmost confidentiality. Please feel free 
and answer all the questions truthfully. 
 
Section A: Background information (Please tick as appropriate) 
 
 
Gender:   Male [   ]        Female [   ] 
Age: 20-29 years [   ]   30-39 years [   ]     40-49 years [   ]     50 years and above [   ] 
Highest education attained: Diploma [   ]  Degree[   ]  Professional [   ]   Post graduate [   ] 
How many years have you been on the policy? 
1-3 [   ]      4-6 [   ]         7-10 [   ]         10 and above [   ]         
Type of insurance:  Full Risk [   ]       Risk Plus Investment [   ]            
 
 
 
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121 
 
Section B: An assessment of Variables 
Please rank the following statement on the Likert scales ranging from strongly 
disagree to strongly agree; 
Where; 1= strongly disagree, 2= disagree, 3= not sure, 4= agree, 5= strongly agree 
 
Statements  1 2 3 4 5 
Core Service Quality      
1. My insurance provider provides fast service       
2. My insurance provider provides accurate 
services 
     
3. My insurance provider has competitive 
premiums and charges 
     
4. My insurance provider offers a variety of life 
and investment policies 
     
Relationship Quality 
5. My insurance agent/sales-person can be relied 
upon to keep his/her promise 
     
6. My insurance agent/sales-person is usually 
sincere 
     
7. I am confident in dealing with my life 
insurance agent 
     
8. My insurance agent/sales-person puts the 
customers interest before his/her own 
     
9. My insurance agent/sales person and I are not 
in competition –selling of insurance 
     
10.   My insurance agent/salesperson is 
trustworthy 
     
11. My insurance agent/salesperson is able to 
blend the facts to create the impression he/she wants 
     
12. My insurance agent/salesperson is honest      
13. My insurance agent/salesperson provides me 
with relevant information needed to purchase a life 
policy  
     
14. My insurance agent/salesperson has adequate 
knowledge of the insurance products 
     
15. My insurance agent/salesperson possesses the 
right skills 
     
16. My agent/salesperson of my insurance 
company is effective 
     
Tangibles      
17. My insurance company has modern looking 
facilities 
     
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122 
 
18. My insurance company‟s physical features 
are very appealing 
     
19. Employees/agents of my insurance company 
appears neatly dressed 
     
20. Materials associated with the service (policy 
document, manual, leaflet) are visually appealing 
     
 
Section C: Customer Satisfaction 
 
Please ranks the following statement on the Likert scale ranging from strongly 
disagree to strongly agree. 
Where; 1= strongly disagree, 2= disagree, 3= not sure, 4= agree, 5= strongly agree 
Statements  1 2 3 4 5 
21. I am very satisfied with products offered by my insurance 
company 
 
     
22. I am very satisfied with the personal contact in my insurance 
company 
     
23. My insurance company meets  my expectations of a good 
insurance provider 
     
24. My insurance provider is close to being the ideal insurance 
company 
     
25. My decision to choose my insurance company as an 
insurance provider was wise 
     
 
 
Section D: Customer Loyalty  
 
Please ranks the following statement on the Likert scale ranging from strongly 
disagree to strongly agree. 
Where; 1= strongly disagree, 2= disagree, 3= not sure, 4= agree, 5= strongly agree 
Statements  1 2 3 4 5 
26. I say positive things about my insurance provider to other 
people 
     
27. I would recommend my insurance provider to those who 
seeks my advice on insurance  
     
28. I will encourage friends and relatives to use the services of 
my insurance provider 
     
29. I intend to do business with my present insurance provider       
30. I would put out good messages about my insurance provider      
 
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Section E: Switching Cost 
 
Please ranks the following statement on the Likert scale ranging from strongly 
disagree to strongly agree. 
Where; 1= strongly disagree, 2= disagree, 3= not sure, 4= agree, 5= strongly agree 
Statements 1 2 3 4 5 
Financial Cost      
27. My insurance company allows me to assess some portion of my 
policy periodically 
     
28.My insurance company pays some money after a period without 
suffering any losses 
 
     
29.My insurance company pays significantly large claims (Sum 
Assured) 
 
     
30. I will lose my contributions and benefits when  I terminate my 
policy 
 
     
Procedural Cost      
31. Life insurance policy is long term in nature 
 
     
32. It will require me to have some waiting period to assess claims 
 
     
33.I will have to fill out some documents and provide my bank 
details 
     
Relational Cost      
34.I am more comfortable interacting with the people working for 
my service provider than I would be if I switched provider 
 
     
35.I would miss working with the people at my service provider if I 
switched provider 
 
     
36.In general it will be a hassle switching to another insurance 
company   
 
     
 
 
THANK YOU. 
 
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